By Richard Rubin 

Presidential candidates Hillary Clinton and Donald Trump would take the tax code in opposite directions, with the split being especially sharp on their treatment of the top 1% of U.S. households, according to an analysis released Tuesday.

The tax policy divide between the candidates offers voters a clear choice between two theories of economic growth and two conceptions of who should bear the U.S. tax burden.

"They really couldn't be more different," said Leonard Burman, director of the Tax Policy Center, which analyzed both candidates' tax plans. "In almost every meaningful respect, these plans are mirror images."

Mr. Trump's plan would cut taxes by $6.2 trillion over a decade, removing more than 13% of projected federal revenue and delivering about half the benefit to the top 1%, according to the Tax Policy Center. Those richest households would get an average tax cut in 2017 of $214,690 and would see their after-tax income increase by 13.5%. Middle-income households, on average, would see tax cuts, too, though their gains wouldn't be as large as a share of income.

Mrs. Clinton, meanwhile, would increase taxes by $1.4 trillion, concentrated on the top sliver of U.S. households. The top 1% would see after-tax income fall by 7.4% and face an average tax increase of $117,760 in 2017. Most Americans in lower income groups would get small tax cuts.

Mr. Trump's tax cuts would amount to a 2.6% of gross domestic product and be nearly double those that President George W. Bush pushed through Congress in 2001 and 2003. He would have the top 1% pay 25% of federal taxes. Mrs. Clinton, meanwhile, would increase taxes by 0.6% of GDP and make the top 1% pay 31.5% of the larger total.

The Tax Policy Center is a project of the Brookings Institution and Urban Institute; Mr. Burman was a tax official in the Treasury Department under President Bill Clinton.

The analyses don't include either candidates' spending proposals or estimates of what would happen to tax revenue as a result of economic changes caused by the tax plans. Mr. Burman said a further study of the plans' economic effects is forthcoming.

To pay for targeted tax cuts and spending programs, Mrs. Clinton would raise taxes on the wages, business income, capital gains and estates of the richest Americans, using layers of new taxes to make them pay what she says is their "fair share." Those changes would reduce the incentive for high-income taxpayers to save and invest, according to the center.

The center's analysis does show tax increases under the Clinton plan, on average, starting for the top 20% of households, which have household incomes above $143,100, according to the expansive definition of income the center uses.

That is below the $250,000 threshold Mrs. Clinton has set as the barrier for where she won't raise taxes. She wouldn't tax those people directly; as shareholders and workers, they would bear some of the burden of Mrs. Clinton's proposals to increase some corporate taxes.

The analysis includes a plan the campaign announced earlier Tuesday that would double the $1,000 child tax credit for children ages 4 and under.

Mr. Trump would lower marginal tax rates, cap itemized deductions, repeal the estate tax and set a new 15% tax rate for corporations and for businesses that report their profits on their owners' tax returns. Those so-called pass-through businesses, in some cases, would have to pay a second layer of dividend taxes, just like corporations.

Mr. Trump would also increase the standard deduction, eliminate personal exemptions, repeal the head-of-household filing status and allow parents to deduct child care costs. The combination of those changes would raise taxes on many large families and single parents, according to the center. The Trump campaign has disputed that and said it would ensure no one would pay higher taxes.

Mr. Burman said the Trump campaign also objected to other assumptions but didn't offer clarifying information about aspects of their plan.

The Trump campaign says its tax plan would spur economic growth and cover some of its own costs. Mr. Burman said the budget deficits created by the plan would lead to higher interest rates.

"Eventually higher interest rates would swamp the effect of lower tax rates," he said, "so that in the long run, the economy would be worse off than it is under current law."

Write to Richard Rubin at


(END) Dow Jones Newswires

October 11, 2016 13:14 ET (17:14 GMT)

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