Comparing the Tax Plans: Biden vs. Trump

As the upcoming election approaches, it’s crucial to understand the different tax plans proposed by each Presidential candidate, Biden vs Trump. In this blog, we’ll break down the tax proposals of Joe Biden and Donald Trump, explore the potential impacts, and discuss both the benefits and critiques of each plan.

Biden vs. Trump tax plan

Corporate Taxes

Joe Biden:

  • Increase Corporate Tax Rate to 28%: Biden plans to raise the corporate tax rate from the current 21% to 28%.
    • Perceived Benefits: This increase is intended to generate additional revenue for government programs and reduce the deficit.
    • Critiques: Critics argue that higher corporate taxes could lead to increased costs for businesses, potentially resulting in reduced investments, lower job creation, and possibly higher prices for consumers.

Donald Trump:

  • Lower Corporate Tax Rate to 20%: Trump proposes to slightly lower the corporate tax rate from 21% to 20%.
    • Perceived Benefits: The goal is to encourage business investment and economic growth by reducing the tax burden on companies, potentially leading to job creation and higher wages.
    • Critiques: Opponents contend that lowering corporate taxes could reduce government revenue, increase the deficit, and primarily benefit large corporations and wealthy shareholders.

Individual Income Taxes

Joe Biden:

  • Raise Top Tax Rate to 39.6%: For individuals earning above $400,000, Biden plans to increase the top individual income tax rate to 39.6%.
    • Perceived Benefits: This change aims to increase revenue from higher earners to fund social programs and reduce income inequality.
    • Critiques: Critics suggest that higher taxes on high earners could discourage investment and entrepreneurship, potentially slowing economic growth.
  • Increase Investment Income and Medicare Tax: Biden also proposes to increase the net investment income tax and Medicare tax to 5% for incomes above $400,000.
    • Perceived Benefits: This aims to bolster Medicare funding and reduce income inequality.
    • Critiques: This may lead to higher tax burdens on investments, potentially affecting investor behavior.

Donald Trump:

  • Make TCJA Tax Cuts Permanent: Trump seeks to make the individual tax cuts from the 2017 Tax Cuts and Jobs Act (TCJA) permanent.
    • Perceived Benefits: These cuts, set to expire in 2025, primarily benefit middle- and high-income earners, potentially leaving more money in taxpayers’ pockets and stimulating economic activity.
    • Critiques: Critics argue that making these cuts permanent could reduce government revenue and disproportionately benefit higher-income individuals.
  • Exempt Tips from Income Taxes: Trump proposes exempting tips from income taxes, benefiting workers in the service industry.
    • Perceived Benefits: This could increase take-home pay for millions of service workers.

Critiques: Some argue this could complicate tax administration and lead to reduced tax revenue.

Biden vs. Trump tax plan

Capital Gains and Dividends

Joe Biden:

  • Tax at Ordinary Rates for High Earners: Biden plans to tax long-term capital gains and qualified dividends at ordinary income tax rates for individuals earning over $1 million.
    • Perceived Benefits: This aims to increase tax revenue from wealthy investors and address income inequality.
    • Critiques: Higher taxes on capital gains could discourage investment and savings, potentially slowing economic growth.
  • Tax Unrealized Gains at Death: Biden also proposes taxing unrealized capital gains at death above a $5 million exemption ($10 million for joint filers).
    • Perceived Benefits: This would prevent large amounts of untaxed wealth from being passed on to heirs.
    • Critiques: Opponents argue this could create liquidity issues for heirs and complicate estate planning.

Donald Trump:

  • No Changes Proposed: Trump has not proposed any changes to the current capital gains and dividend tax policies.

Credits and Deductions

Joe Biden:

  • Expand and Make Child Tax Credit Fully Refundable: Biden aims to permanently expand the Child Tax Credit and make it fully refundable.
    • Perceived Benefits: This provides greater financial support to families, especially those with lower incomes.
    • Critiques: Critics argue that increasing these credits could significantly increase government spending.
  • Increase Earned Income Tax Credit: Biden also proposes a permanent increase in the Earned Income Tax Credit for workers without qualifying children.
    • Perceived Benefits: This aims to reduce poverty and encourage work.
    • Critiques: Some argue this could increase government spending and the complexity of tax filings.
  • Expand Premium Tax Credits: By making premium tax credits permanent, Biden seeks to make health insurance more affordable for middle- and low-income families.
    • Perceived Benefits: This aims to improve access to healthcare.
    • Critiques: Critics suggest this could lead to higher government spending and dependence on subsidies.

Donald Trump:

No Changes Proposed: Trump has not proposed any changes to credits, deductions, and exemptions.

Trump vs biden tax plan

Estate and Wealth Taxes

Joe Biden:

  • Tighten Estate Tax Rules: Biden plans to tighten the rules related to the estate tax, making it harder for wealthy individuals to avoid estate taxes through loopholes.
    • Perceived Benefits: This aims to ensure that more estates are subject to taxation, increasing government revenue.
    • Critiques: Critics argue this could complicate estate planning and lead to higher taxes on family-owned businesses.

Donald Trump:

  • Make TCJA Estate Tax Cuts Permanent: Trump aims to make the estate tax cuts from the TCJA permanent.
    • Perceived Benefits: This would reduce the tax burden on inherited wealth, potentially benefiting family-owned businesses and wealthy individuals.
    • Critiques: Opponents argue this could reduce government revenue and primarily benefit the wealthy.

Excise Taxes

Joe Biden:

  • Increase Stock Buyback Tax: Biden proposes increasing the stock buyback excise tax to 4%.
    • Perceived Benefits: This aims to discourage companies from using excess profits for buybacks instead of reinvesting in their businesses or paying higher wages.
    • Critiques: Critics argue that this could lead to reduced shareholder value and discourage investment.

Donald Trump:

  • Tax Large Private University Endowments: Trump plans to tax large private university endowments, targeting institutions with significant financial resources.
    • Perceived Benefits: This could generate revenue and address perceived inequities in university funding.

Critiques: Opponents argue this could reduce funding for scholarships and educational programs.

Biden vs. Trump tax plan

Tariffs and Trade

Joe Biden:

  • Maintain and Expand Tariffs on Chinese Goods: Biden plans to maintain the current Section 301 tariffs on $360 billion worth of Chinese goods and add $18 billion in tariffs on steel, aluminum, green energy, and medical goods.
    • Perceived Benefits: This aims to protect American industries and reduce reliance on Chinese imports.
    • Critiques: Critics argue that tariffs can lead to higher prices for consumers and retaliatory measures from trading partners.

Donald Trump:

  • Universal Baseline Tariff and Increased Tariffs on China: Trump proposes imposing a universal baseline tariff on all U.S. imports and a 60% tariff on imports from China.
    • Perceived Benefits: This aggressive tariff strategy aims to protect U.S. industries and encourage domestic production.
    • Critiques: Opponents argue this could lead to higher consumer prices, trade wars, and negative impacts on global supply chains.

Summary

In summary, Biden vs Trump is going to be an extremely important election. 

Joe Biden’s tax plan focuses on increasing corporate and individual taxes for high earners, expanding tax credits for families and workers, and maintaining and increasing tariffs. His approach aims to generate revenue for social programs and reduce income inequality. Donald Trump’s plan emphasizes lowering corporate taxes, making individual and estate tax cuts permanent, exempting tips from income taxes, and significantly increasing tariffs on imports, particularly from China. His strategy aims to stimulate economic growth and protect American industries.

Both plans reflect the candidates’ differing priorities and will impact corporations, individuals, and international trade in various ways. It’s important to consider how these changes might affect you and your financial situation.

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