The Tax Issue: Trump vs. Clinton

As the Primaries wind to a close and work begins in earnest for the elections coming up, people are still finding it hard to veer from the personalities of the candidates and look at actual issues. Voters, and the media, are more interested in highlighting scandals, reactions to tragedies, clothing, and campaign funding rather than policy or tax issues that should really be at the forefront of the election.

Trump and Clinton both have substantive stands on taxation that are a lot more relevant to the immediate lives of voters than their takes on emails, or the term “radical Islam”. As we get closer to the election, taxation and similar issues, will become more important than stances on more esoteric policies that don’t necessarily translate to direct impacts.

Hillary wants to tax the 1%, and tax high frequency trading

Going into the election, one of Clinton’s most visible stances is her proposed change in tax structure. In a nutshell, Clinton wants to tax people who make lots of money more than the average American, and also start taxing high-frequency stock trading to help regulate Wall Street.

This system is based on the Buffet Rule—looking to implement a 4% surcharge on high income tax payers, adding a 43.6% marginal tax rate for income over $5 million, and a 24% marginal tax rate for qualified dividend and long-term capital gain income.

Basically, anyone making over a million dollars a year might look at paying up to 30% in taxes. Clinton also wants to limit savings to 28% of a deduction, which she says will allow the government to raise some revenue without completely gutting the economy of disposable income.

In short, under a Clinton Presidency, voters can expect a -1% 10 year GDP growth rate, -2.8% 10 year capital investment growth rate, a 0.8% 10 year wage rate growth rate, -0.3% million added jobs, but also a 10 year static revenue estimate of 498 billion dollars, and a 10 year dynamic revenue estimate of 191 billion dollars.

Trump planning on streamlining tax brackets, and reduce taxes on corporates

Trump, on the other hand, wants to simplify the entire system. He wants to take seven individual tax brackets and condense them to three: a bracket that owes 10%, one that owes 20%, and a third that owes 25%.

This plan would also eliminate a lot of individual taxes and streamline the process—folks would no longer be looking at an alternative minimum tax, a new investment income tax, or the estate tax.

Trump’s plan is also business friendly, as it proposes cutting corporate taxes to 15% and seeks to eliminate tax deferral on overseas corporate income, and only a one time repatriation tax on all foreign profits currently deferred.

Basically, under a Trump presidency, voters are looking at a 11.5% 10 year GDP growth, 29% 10-yer capital investment growth, 6.5% 10 year wage rate growth, and 5.3 million added jobs. However, a Trump presidency also looks at a 10 year static revenue loss of 11,980 billion dollars, and a 10 year dynamic revenue loss of around 10,000 billion dollars. 

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