As the presidential primary season shifts into high gear, the wide-open field of candidates is slowly narrowing. Several candidates have left the race while others continue to garner delegates and keep their names on the ballots. Each individual running for president has his or her own ideas for the direction in which the country should move, including tax policy. The 2020 presidential election may also lead to significant changes to the Internal Revenue Code, which encompasses provisions enacted in the Tax Cuts and Jobs Act (TCJA). However, specifics of tax policy are rarely addressed during the campaign and debates.
In order to help you sort out the candidates’ current positions on various tax issues, we used candidates’ official websites as well as analysis made by the Tax Policy Center and other nonpartisan sources to compile the Republican and Democratic candidates’ positions on specific tax issues pertaining to businesses, international interests and individuals. Given the sheer number of candidates, the following summarizes the common tax themes around which the candidates have coalesced and outlines new ideas certain candidates are proposing that could significantly transform how individuals and businesses are taxed.
The Trump administration has not yet provided a detailed wish list of new tax changes if it should win a second term. Since passage of the TCJA at the end of 2017, the White House hasn’t presented any formal tax proposals; however, Larry Kudlow, director of the National Economic Council, said the administration is looking to introduce a middle-class tax cut in September. Moreover, the White House’s fiscal 2021 budget proposal included an extension through 2035 of individual and estate tax changes from the TCJA such as the lowered personal tax rates, the doubled standard deduction and the $10,000 cap on state and local tax deductions. Currently, these expire after 2026. Further details of the president’s tax platform will likely be unveiled as the election season progresses.
There is one Republican challenger remaining this primary season. Bill Weld, the twice-elected former governor of Massachusetts, is advocating a tax rate cut for the bottom 15% to 20% of taxpayers. In addition, he would like to lower the capital gains tax rate to 10% and establish a flat 19% individual income tax rate. He proposes to eliminate the corporate and estate taxes and lower payroll taxes; instead, he favors levying a carbon tax of $40 to $50 per ton.
With eight candidates currently running for the Democratic presidential nomination, the candidates are vying for votes in the primaries. Joe Biden, Michael Bloomberg, Pete Buttigieg, Tulsi Gabbard, Amy Klobuchar, Bernie Sanders, Tom Steyer and Elizabeth Warren each established tax proposals as part of their respective overall campaign platforms. Be on the lookout for modifications and clarifications to these tax policies as the party conventions and general election draw near.
With few exceptions, all of the remaining Democratic candidates support raising the top individual tax rate back to 39.6%, up from 37%. (Gabbard has not stipulated a rate increase and Warren has only indicated a repeal of the lower TCJA rates). Sanders’ plan would increase each bracket by 4% (except it would leave the 10% bracket as is) and add brackets progressing up to 66% on incomes above $10 million. Steyer would like to reduce tax rates by 10% for individuals with less than $200,000 in income ($250,000 for families).
In addition, all but one of the candidates propose to tax capital gains at ordinary income rates; Biden and Bloomberg propose this change for taxpayers with income over $1 million. Buttigieg and Warren would like to adopt a mark-to-market approach for taxing capital gains, meaning assets would be taxed annually at fair market value. Warren also plans another 14.8% tax on the lesser of investment income or total income above certain thresholds (on top of the existing 3.8% net investment income tax).
Many of the candidates would like to see increases in and expansions of the child tax credit and the earned income tax credit. Gabbard is the lone candidate to not formally indicate whether she would revise these credits. Bloomberg and Steyer plan to make the child tax credit refundable. Sanders has not stated a position on either. Interestingly enough, only Buttigieg is currently proposing to eliminate or modify the $10,000 cap on the state and local tax deduction for individual taxpayers.
Several candidates propose to increase the cap on the Social Security wage base. Ideas range from raising the cap on wages to above $250,000 (Buttigieg, Gabbard ($400,000), Klobuchar, Sanders, Warren) to subjecting all income to the payroll tax (Biden). Gabbard would increase the Social Security tax rate to 7.4% (14.8% between employer and employee portions) by 2043. Furthermore, Sanders and Warren propose subjecting all pass-through business income to self-employment taxes. Sanders would impose an additional 7.5% payroll tax on employers, exempting the first $2 million of wages paid, while Warren would implement an additional 14.8% payroll tax on wages in excess of $250,000.
Estate and wealth taxes
In a significant change from historical tax policy, a few of the candidates are proposing a wealth tax ranging from 1% on net wealth greater than $32 million (Sanders, Steyer) to 2% on net wealth greater than $50 million (Warren) or $1 billion (Steyer). This tax rate is further increased by assessing penalties (40% to 60% tax on lowered thresholds) on taxpayers who relinquish their U.S. citizenship. Under Sanders’ plan, the rates would incrementally increase so wealth over $10 billion would be taxed at an 8% rate.
With respect to estate taxes, Biden and Bloomberg propose to eliminate the basis step-up of assets upon death. Sanders would incrementally increase the estate tax rate to 77% for estates valued over $1 billion. Bloomberg would lower the value threshold upon which an estate would be taxed and eliminate planning tools used to minimize estate taxes.
All of the candidates for president, except Gabbard, advocate raising the corporate tax rate, increasing the rate to anywhere between 25% and 35% (up from the current 21%). In addition, Biden and Klobuchar would like to reinstate the corporate alternative minimum tax on large corporations.
Changes to deductions, credits and a variety of other business tax preferences are also being proposed by most of the candidates. Common themes among the candidates include expansion of wind and solar energy credits (Biden, Bloomberg, Buttigieg, Klobuchar) as well as creating clean energy improvement tax preferences (Bloomberg, Buttigieg, Klobuchar, Warren). Some of the candidates coalesce around the repeal of the 20% pass-through entity deduction (Bloomberg, Buttigieg, Sanders) and removal of fossil fuel tax preferences (Biden, Buttigieg, Klobuchar, Sanders, Steyer, Warren).
With few specific proposals, the candidates essentially wish to tighten the ability for taxpayers to evade or avoid U.S. tax. Whether it is imposing sanctions on countries facilitating tax evasion (Biden) or it’s raising taxes on foreign income (Biden, Bloomberg, Sanders, Warren), many of the candidates have some form of international tax reform in their platform. Bloomberg includes a tightening of transfer-pricing rules and cross-border adjustments on emissions-intensive goods. Sanders would deny foreign tax credits on fossil fuel-related industries as well as lower the base erosion and anti-abuse tax (BEAT) threshold and eliminate the foreign-derived intangible income (FDII) preference. Warren would like to tax foreign company profits based on the share of U.S. sales and require U.S. trade agreements with other countries to incorporate efforts to curb international tax evasion.
Three Democratic candidates (Bloomberg, Buttigieg, Klobuchar,) would impose a carbon tax. Bloomberg would raise tobacco taxes. Three of the candidates (Buttigieg, Sanders, Warren) recommend a financial transaction tax ranging from 0.005% to 0.5% on all trades. Finally, Buttigieg and Klobuchar consider imposing a financial risk fee on large banks.
At a glance, the chart below summarizes some of the key tax policies of each of the Democratic candidates for president as compared to current law.*
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