Comparing Presidential Candidates’ Tax Proposals

Tax policy is a central issue in presidential elections, offering a lens into the candidates’ economic philosophies. Their proposals provide a roadmap for fiscal management, economic growth, and the distribution of the tax burden. These plans represent distinct visions for the country, influencing everything from household budgets to corporate investment decisions. Candidates use their platforms to signal broader goals, such as stimulating the economy with tax cuts or funding social programs with tax increases.

Proposed Changes to Individual Taxation

Proposals for individual income tax rates and brackets differ significantly. One perspective favors making the lower individual income tax rates from the Tax Cuts and Jobs Act (TCJA) permanent, which would maintain the current structure set to expire after 2025. Under this plan, the top marginal rate would remain at 37%. In contrast, the opposing view proposes to increase the top marginal tax rate to 39.6% for individuals earning over $400,000.

A key difference is the proposed introduction of a minimum tax on the wealthiest Americans. One proposal would impose a 25% minimum tax on total income, including unrealized capital gains, for taxpayers with wealth exceeding $100 million. This represents a shift in how wealth is taxed, moving beyond traditional income-based taxation. The alternative approach does not include such a tax, focusing instead on extending existing tax provisions.

The standard deduction is also a subject of competing proposals. One candidate advocates for making the increased standard deduction from the TCJA permanent, which would continue the higher amounts that are set to expire after 2025. The opposing view has not put forth a specific proposal to address the expiring standard deduction but has indicated a desire to shield those earning under $400,000 from tax increases.

Tax credits, particularly those aimed at families, are another area of focus. One candidate proposes to expand the Child Tax Credit and the Earned Income Tax Credit to provide greater relief to middle- and lower-income families. The alternative proposal would make the expanded Child Tax Credit from the TCJA permanent, which increased the credit to $2,000 per child.

The taxation of capital gains and dividends is a major point of contention. One candidate proposes to increase the top long-term capital gains rate to 39.6% for individuals with taxable income exceeding $1 million. This same proposal would expand the Net Investment Income Tax (NIIT) base to cover all pass-through business income for those earning over $400,000. It would also increase the NIIT and additional Medicare tax rates by 1.2 percentage points for income above this threshold.

The opposing view seeks to maintain the current capital gains tax rates or potentially lower them to encourage investment. This approach is based on the belief that lower capital gains taxes stimulate economic growth. This candidate would also make permanent the increased exemption amounts for the individual Alternative Minimum Tax (AMT), which were part of the TCJA.

Proposed Changes to Business and Corporate Taxation

The corporate income tax rate is a central point of disagreement. One candidate has proposed increasing the corporate tax rate from the current 21% to 28%, a partial reversal of the reduction from 35% enacted by the TCJA. The stated goal is to ensure large corporations contribute more to the economy, with the additional revenue intended to fund public investments.

In contrast, another proposal would reduce the corporate tax rate from 21% to 20%, with some discussion of lowering it to 15% for companies that manufacture goods in the U.S. This proposal is rooted in the idea that lower corporate taxes encourage domestic investment and job creation. This view also favors repealing the 15% corporate alternative minimum tax (CAMT) that was established by the Inflation Reduction Act.

The opposing view on the CAMT is to increase it from 15% to 21%. This reflects a philosophy of ensuring that large, profitable corporations pay a minimum level of tax, regardless of deductions and credits. Another proposal would block businesses from deducting compensation for employees who make more than $1 million.

Proposals also differ on the tax treatment of pass-through businesses, such as S-corporations and partnerships. One candidate’s plan to make the TCJA provisions permanent would likely extend the Section 199A Qualified Business Income (QBI) deduction, which is set to expire after 2025. This deduction allows owners of pass-through businesses to deduct up to 20% of their qualified business income. The opposing candidate has not detailed a specific plan for the QBI deduction.

Other proposals address corporate stock buybacks and international taxation. One candidate has proposed increasing the current 1% excise tax on corporate stock buybacks to 4% to reduce the tax disparity between buybacks and dividends. Another proposal includes increasing the tax rate on the foreign earnings of U.S. multinational corporations from 10.5% to 21%.

Proposed Changes to Estate and Wealth Transfer Taxation

Candidates’ plans for the federal estate tax, a tax on assets transferred after death, also differ. One candidate proposes to make the increased estate and gift tax exemption from the TCJA permanent. This approach would continue to shield a significant majority of estates from federal taxation.

The opposing candidate’s plan would likely see the estate and gift tax exemption revert to its pre-TCJA level of approximately $5 million, adjusted for inflation, after 2025. This would subject more estates to the tax and at a lower threshold. This approach aligns with a goal of increasing taxes on the wealthy to fund social programs and reduce wealth inequality.

A significant proposal from one candidate is the taxation of unrealized gains at death. Under this plan, appreciated assets transferred at death would be subject to capital gains tax, with a $5 million per person exemption. This would eliminate the current “stepped-up basis” rule, where the cost basis of an inherited asset is reset to its fair market value at the time of death. The other candidate’s proposal would maintain the current stepped-up basis rule.

Proposed Changes to Payroll and Other Federal Taxes

Proposals to alter payroll taxes, which fund Social Security and Medicare, are a component of the candidates’ economic platforms. One candidate has proposed applying the Social Security payroll tax to earnings over $400,000. This would mean that high earners would pay Social Security taxes on a larger portion of their income.

The opposing candidate has not put forth a specific proposal to change the structure of payroll taxes. However, their focus on broad-based tax cuts could have indirect effects on the long-term solvency of Social Security and Medicare. The differing approaches to payroll taxes reflect different philosophies on how to ensure the financial stability of these programs.

Beyond payroll taxes, candidates have discussed other ideas for new federal taxes. One candidate has discussed the idea of a universal baseline tariff on all U.S. imports, with even higher tariffs on goods from certain countries. He has also suggested the possibility of using this tariff revenue to replace the federal income tax, which would fundamentally restructure the U.S. tax system.

Proposed Changes to IRS Enforcement and Tax Administration

The funding of the Internal Revenue Service (IRS) is a point of contention. One perspective supports increased funding for the IRS to enhance enforcement and modernize its technology, as reflected in the Inflation Reduction Act of 2022. The goal is to close the “tax gap”—the difference between taxes owed and taxes paid—by focusing on high-income individuals and large corporations.

The opposing view favors reducing the IRS budget or restraining its growth. This position is often accompanied by criticism of the agency’s expanded enforcement capabilities. The underlying belief is that a smaller, less intrusive IRS is better for taxpayers and the economy.

The candidates have also articulated different priorities for tax enforcement. One candidate has made it clear that their administration would prioritize audits of high-income individuals and large corporations. This approach is based on the idea that increased scrutiny in this area will yield significant revenue. The alternative perspective is to reduce audit rates or ensure that enforcement actions do not disproportionately burden small businesses and middle-income taxpayers.

Proposals also address taxpayer services and IRS technology. One candidate’s platform includes investments in technology to improve the taxpayer experience and make the filing process easier. This could include the development of a return-free filing system, where the IRS would pre-fill tax returns for taxpayers with simple financial situations. The opposing candidate’s platform has been less specific on technology modernization but has supported efforts to improve customer service.