Taxes and the 2020 presidential campaign

As we enter the dog days of summer, the political calendar is about to heat up. Both major parties are scheduled to hold their conventions in August (Democratic National Convention Aug. 17-20; Republican National Convention Aug. 24-27). After the nominations are made official, we will have just over two months before Election Day.

Tax policy may not be the headline issue in the presidential campaign, but it will certainly get some attention given the clear differences between the candidates. The Trump campaign has not yet released a detailed tax plan, but the Republicans are likely to highlight the Tax Cuts and Jobs Act (TCJA) as a signature domestic policy achievement, and possibly propose making the individual changes in that law permanent. On the Democratic side, the Biden campaign recently published a lengthy policy document covering a wide range of issues, including making the tax code more progressive, raising the corporate rate and expanding payroll taxes on high-earning taxpayers. Biden’s campaign also released a new proposal for addressing racial economic inequality, offering a number of tax incentives.  

We will provide a comprehensive analysis and comparison of the two candidates’ tax policy priorities following the conclusion of both parties’ conventions. In the meantime, this short alert will summarize former Vice President Biden’s proposals for individual, business, payroll and estate taxes, compared to the TCJA and Coronavirus Aid, Relief, and Economic Security (CARES) Act. However, expect these provisions to evolve. Given the uncertainty of the times, as well as ongoing negotiations over a fourth stimulus package, both campaigns will likely monitor economic conditions and revise their tax platforms accordingly. 

Individual taxes

The TCJA reduced the top individual rate to 37%, eliminated personal exemptions, increased the standard deduction, capped the state and local tax (SALT) deduction at $10,000, and removed many miscellaneous itemized deductions. Most of these changes are scheduled to expire after 2025. The administration occasionally has mentioned making the individual changes permanent as part of a “tax reform 2.0” package, but few details have emerged. A principal roadblock to making these changes permanent is that these provisions would increase the deficit over a 10-year budget period. The Senate’s Byrd rule prohibits legislation from increasing deficits in the long term outside the budget window, which is typically 10 years. This is the reason these provisions were scheduled to expire when the TCJA was enacted.