Aug. 12, 2016 original post date
Aug. 17, 2016 update
Election 2016: Compare Trump v Clinton on Taxes
original article written by Net Advisor™
Excerpt: Here we review both a Trump and Clinton Administration’s economic tax plans. Our requirement is a plan cannot say something like, ‘we will create 10 million jobs,’ then provide no mathematical formula to get there. That would be called “advertising,” or “political promises;” in other words – misleading – if there is no quantitative rational to back up the data. That data must also be within the realm of economic probability. The data here is based on each of the campaigns and from cited 3rd party sources.
A Trump Administration offers across-the-board Tax DECREASES for everyone. The plan especially helps lower income people and families.
- Income Under $25,000 (Single): Lower Tax Rate From Currently 15% to 0.0%.
- Income Under $50,000 (Couples): Lower Tax Rate From Currently 15% to 0.0%.
- Top Tax Rate: Lower Tax Rate From Currently 39.6% to 33%.
- Business Income Tax: Lower Top Tax Rate From Currently 35% to 15%.*1
- Death (Estate) Tax: Lower Tax Rate From Currently 18-40% to 0.0%.
- Long-term Capital Gain Tax: Lower Tax Rate From Current 43.4% to 20% down to 0% for lower and fixed income (ie: retired persons living off on dividends.)
*1 Lower tax rate applies to ALL U.S. businesses – individual, sole proprietorships, small business, LLC’s, partnerships as well as multi-national corporations. ALL businesses benefit from lower taxes, not just big corporations.
Trump’s tax plan helps the poor and many wage earners making under $25,000 a year (single), $50,000 a year (for couples). For these two groups, the federal income tax would be ZERO. Not factoring any additional tax deductions, this would save a single person earning say $25,000 a year $3,750 a year or $312/ per month. That savings number doubles for couples filing together in same household.
CNN also quotes non specified “nonpartisan groups” that Trump’s plan would increase the national debt. That is a poor citation. Who are these vague “nonpartisan groups,” and let’s look at their math. Here is the REAL problem.
Lowering taxes does NOT increase debt.
Borrowing money you don’t have increases debt.
— Net Advisor™
Yes, I just quoted myself, but someone needs to tell America the truth about this.
Under the Trump plan, the U.S. would have among the lowest corporate taxes in the world. U.S. companies operating factories outside of USA will have incentive to move some or all their foreign jobs back to USA with the corporate tax rate cut more than half from currently 35% to 15%. The huge tax savings could be used to expand business investment in the USA (new jobs for Americans).
Companies could then afford to pay higher U.S. wages when their federal income tax bracket was slashed by over 50%.
The biggest non-government funded stimulus plan for the U.S. economy would be to allow U.S. companies to bring back their profits earned from products and services sold in foreign countries. Reuters reported there is $2.1 Trillion in U.S. corporate cash held overseas. Trump has proposed a 10% Re-patriot tax to bring off-shore money back to the U.S.
Time reported that a similar plan occurred in 2004 which brought back half of the off-shore U.S. cash back to the USA. At that time, it was $362 Billion that came back to the USA. Today we are talking over $2 Trillion.
That off-shore cash could be returned to stockholders in the form of special dividends (which create income tax to the federal government for higher income earners). It also can create a stimulus effect to the economy where money in consumer’s hands are generally spent on products and services. It could be used to buy back stock, thereby driving stock prices higher.
Preferably, money could be used for domestic business purposes. Investing in ideas and jobs funded with private, not taxpayer money. Whatever the money is used for, bringing it back to the U.S. is better than money doing nothing in overseas accounts.
Trump wants to repeal and replace Obamacare. We don’t see any details on this complex task yet. As someone who was multi-licensed in the industry, I’ve put-together this as a starter plan:
 If You Have Children, or Plan to Have Children, Read This: Trump’s Childcare Tax Deduction:
Trump offers huge tax savings for childcare expenses. A Washington Post article mislead readers into thinking that child tax credits are already deductible.
“Some such expenses are already deductible; experts say that the additional amounts will largely benefit middle- and upper middle-class families.”
— Washington Post, Aug. 8, 2016 (p1, parr4).
Under current IRS Rules (2015), a maximum of 35% of qualifying expenses with a maximum of $3,000 (one child/dependent under age 13), or $6,000 two or more children/dependents under age 13), may be claimed as a tax credit (2015 IRS Form).
In order to claim the whole 35% tax credit, your income cannot exceed $15,000 in a given year. So let’s say you have one child in full-time day care running $500 per month ($6,000 year). Your income is low enough where you qualify for the entire 35% credit. Thus, your tax credit is $2,100. (Math: $6,000 qualified childcare expenses times (x) 35% = $2,100.) The result is, under current tax code, you still paid $3,900 in childcare expenses that you could not deduct.
This credit is reduced for incomes over $15,000 a year. If your income is $43,000 or more a year, your child tax credit is reduced down to 20%. Thus, under current tax code, 80% of your childcare expenses would not be deductible.
Also under the current IRS code, the child tax credit is not refundable. Thus, if you had childcare expenses and did not owe taxes, you get no refund of childcare expenses.
Under the Trump plan, you could deduct 100% of these qualified child-care expenses.
“One notable exception was his (Trump’s) call to enable families to “fully deduct” all child-care expenses from their taxes.”
— Washington Post, Aug, 8, 2016 (p 1, parr4).
Thus if you owe say $5,000 in taxes and had $3,000 in childcare expenses in one year, you tax liability is reduced to $2,000 (Math: $5,000 taxes – $3,000 childcare expenses = $2,000 owed in taxes. Does not factor any other deductions).
If you are single with income under $25,000 you may have a credit to apply to next year’s taxes or a refund. This part has not been determined. If you are a couple with childcare expenses and earn under $50,000 you have either a credit or refund. Again this last part (credit or refund is not yet determined). None-the-less, Americans could fully write off childcare costs on their taxes. This full deduction especially helps the poor and middle-class as their tax savings is retained by the family household, not by the federal government.
Childcare Tax Analysis:
The Trump plan offers a 100% tax deduction for those with qualified childcare expenses. This especially helps low income, and middle class families burdened with the high costs of childcare. Single or coupled families would be able to expense these costs and keep more of their own income for their own use, not for the government’s (mis)use.
President Obama made promises about healthcare savings (video). Obama had no math or reality to support his claim. The difference here is the childcare tax credits would be amended to the tax code and become law. That is what the people want. Savings that is legally written into the tax code. That way it’s not a promise or hope – it would become the law.
Hillary Clinton Administration
A Clinton Administration does not offer tax exemptions for lower income people or families. Clinton would impose HIGHER tax rates punishing higher income earners and would place more regulations on business.
- Income $0 to $9,275 (Single): Tax Rate 10%. (same as 2015).
- Income $9,276 to $25,000 (Single): Tax Rate 15% (same as 2015).*2, *3
- Income $0 to $18,550 (Married): Tax Rate 10%. (same as 2015).
- Income $18,551 to $50,000 (Married): Tax Rate 15%* (same as 2015).*2, *4
- Top Tax Rate: Tax INCREASE From Currently 39.6% to 43.6%.
- Business Income Tax: Top Rate From Currently 35% to ____ (Unknown/TBA).
- Death (Estate) Tax INCREASE by Reducing Estate Exemption now from $5.45M to $3.5M.
- Unspecified Tax INCREASE on Social Security For “wealthy people” earning $118,500+.
- Capital Gains Tax: Please see Hillary Clinton Discourages Short-Term Investing below.
Note: We used $1.00 more to show the next higher tax bracket (ie: $9,275 to $9,276; and $18,550 to $18,551, etc.). One generally has to earn that extra dollar to be kicked up to the next higher tax bracket.
*2 The income threshold used in equal comparison of Trump plan for this tax bracket. Trump plan exempts couples from paying federal income taxes up to $50,000 (or $25,000 single, unmarried).
*3 Tax is $927.50 plus 15% of the amount over $9,275 (excluding deductions).
*4 Tax is $1,855 plus 15% of the amount over $18,550 (excluding deductions).
Hillary Clinton Discourages Short-Term Investing.
- Investments held for 1 to 2 years? Tax Increase: 100%
- Holding period would be 6 years to qualify for 23.8% lower tax rate.
- Clinton Maintains Short-term Capital Gain Tax at 43.4%.
Other Sample Tax Increases
- $1 Trillion in New Taxes.
- Unspecified tax increase on U.S. business operating internationally.
- Assess an unspecified “risk fee” (tax) on big banks and other financial institutions.
- End “wasteful tax subsidies” (legal tax deductions) for oil and gas companies.
- Imposes “Buffett Rule” (a mandatory 30% tax) on those with incomes over $1 Million a year. We discussed this as a misleading tax argument.
Clinton aggressively penalizes those who run businesses (including small business) and who make higher income. Clinton proposes increasing taxes on higher income social security beneficiaries, and limiting or eliminating IRA contributions if you have too much money in your retirement account(s). Clinton reduces unspecified tax deductions to cap at 28% on “upper income individuals.” No data on what the definition of “upper income” is.
Increasing taxes on businesses operating and selling products overseas makes those U.S. businesses less competitive. Companies will either have to charge consumers more for products or reduce the labor force to be competitive.
Next, everyone loves to hate banks and financial institutions. But keep in mind these institutions do provide services. How would you like to have to pay cash for that car, condo or home?
Having the federal government bypass stockholders, decide how businesses can invest their stockholder’s money, and penalize them with a fee (tax) if the government doesn’t agree with their investments is probably the most intrusive invasion into U.S. business.
If a company makes too many bad investments their earnings go down, and the stockholders (those who have a vested stake in the business) see a decrease value in their stock. Companies can be sued in the private sector. Managers, board members can be fired and replaced by voting at shareholder meetings.
There are plenty of mutual fund, pensions, and other institutions who have huge financial stakes in publicly traded businesses and they don’t want to lose too much money. This free market system has built-in discipline and replacement methods to keep companies on track.
Sometimes they fail, and that is part of it. People can make miscalculations, we are not perfect. But you have to ask. Do you think a body of government officials who have racked up nearly $20 Trillion in debt over the decades are good financial advisors for business?
Clinton Taxing Oil is a Tax on Consumers: Here’s How.
Reducing or ending legal tax deductions for oil and gas companies (generally their investments and development costs) is also a bad idea. The government is single-handedly deciding which businesses should get tax deductions and which ones should not. This sounds pretty discriminatory to me. Here is Obama’s record on his preferred energy companies:
When oil and gas companies are not allowed to make legal tax deductions like any other business, this can force layoffs to offset the higher operating costs to the business and risk increasing the cost of gasoline and heating oil for consumers.
Such a move can also result in higher food prices since food is either imported via ship (runs on fuel/oil) and or trucked to the store. The trucking company charges more for food because their fuel costs would be higher. The store charges more for food too because they had to pay more to the trucking company. Get the idea? Consumers end up paying for higher gas and oil prices.
Clinton Taxing / Penalizing Retirement Savers.
Penalizing those who were fortunate enough to have saved up for retirement (large IRAs), and penalize those families with a special social security tax who make $118,500 a year, taxing those (business, investors) who provide the jobs and private (non-taxpayer) funding for investments does not help grow an economy.
All these taxes (including regulations) on investments, banks, international businesses, domestic energy companies, etc., ultimately end in fewer jobs to offset the higher taxes, and or push higher retail prices on consumers. This is an indirect tax on the poor and middle class.
Politifact claimed that Donald Trump was ‘wrong’ about Hillary Clinton wanting to increase taxes on the Middle Class. Politifact excluded the fact that taxing the above is an indirect tax on consumers. The government has taxes on almost everything. Look at your cell phone bill, cable or satellite bill, your water, electricity, or heating bill. They all have state and federal high taxes as a percentage of the actual underline bill, and these are also taxes that impact the poor and middle class.
Time calls Clinton’s tax plan “modest.” After reading the above, nothing could be further from the truth. Clinton calls her tax plan “Fair,” regurgitates Obama’s “Fair Share” mantra. AFTER Obama was re-elected to his second presidential term, Obama RAISED taxes on 163 million middle class Americans. Clinton claims her tax proposes will not impact 99.98% of the public. Our data analysis here strongly suggests otherwise.
Clinton’s False Claims.
Clinton’s claim that Trump’s “massive tax cut (is) for the very rich” is not a true statement. In comparison to Trump’s plan, low income people (see Point  above), pay no taxes under Trump. Lower income people DO pay taxes under Clinton.
It is true that Clinton admits she dramatically increases taxes on the wealthy, on business and targets specific business the government doesn’t like (all who are dumb enough to give her campaign money). If her business donors max out their contributions to the Hillary campaign, they can always give unlimited amounts of money to the Clinton Foundation and write it off their taxes.
Clinton wants a $5,000 tax credit for families to buy government (Obamacare) plans. There is no specifics to this plan. We would suspect that like typical big government tax code, if you make any decent money, you won’t qualify for much or anything at all.
Just from 2009-2012, the Obama Administration spent $10.6 Trillion on healthcare.
Since then, based on the U.S. government’s own data, more Americans have become uninsured under the government controlled healthcare program.
 Childcare Tax Deduction:
Clinton proposes a trivial 20% tax credit for caregivers up to $6,000 in expenses which only reduces such annual costs by a lousy $1,200 (Math: $6,000 max annual child care expenses times (x) 20% tax credit = $1,200 tax credit). If you can provide total care for someone for less than $1,200 a year, please advise, I have a business ready for you.
 Final Analysis.
Between the two candidate tax plans, we see Trump clearly specifying tax reductions for everyone. This could be a huge domestic job and economic growth provision as more money will be in the People’s hands to save, spend or invest. It will also reduce business costs, incentivizing them to retain those earnings which can be used to invest and expand business, thus creating more jobs.
Clinton’s plan is seen as more of the same big government: Increasing taxes to often unspecified amounts, adding new regulations on people and business which risks layoffs and higher prices on consumers.
Clinton claims her plan is about “Family First” but offers no material benefits to help families: No lower taxes for the poor or middle class, just trivial tax credits.
Clinton also claims she will have an “economy that works for everyone.” The biggest beneficiary to the Clinton proposal is the federal government who will receive more taxes, and greater control over business operations. There is no private sector incentives to create jobs, or invest in America.
In fact, when Hillary Clinton was the Senator for New York, she boasted that voting for her would create 200,000 jobs in New York. Not only did Clinton not create 200,000 jobs, New York manufacturing jobs plunged nearly 25 percent on her watch.
“…nearly eight years after Clinton’s Senate exit, there is little evidence that her economic development programs had a substantial impact on upstate employment. Despite Clinton’s efforts, upstate job growth stagnated overall during her tenure, with manufacturing jobs plunging nearly 25 percent, according to jobs data.”
Now as a Presidential candidate, Clinton boasts even bigger promises. Clinton now claims she will have “the biggest investment in new, good-paying jobs since World War II.’’ With no data to support her rational, Clinton thinks she will create 10.4 millions jobs in her first term.
If one doesn’t have data that can be independently analyzed to support a claim, it’s fantasy math. Again, with no data to back up her claim, Clinton also says Trump would magically lose “3.5 million jobs.” Someone in my social media asked this about Hillary Clinton’s job creation plan:
— Vickie Springer (@VickieSpringer) August 11, 2016
Clinton’s job creation is all about short-term government infrastructure jobs which are paid with increases in taxes, fees and more government debt. Nothing in Clinton’s plan provides long-term jobs, or private sector jobs which is the vast majority of the U.S. economy.
Clinton called Trump’s tax plan for the “very rich.” In reality, Trump’s plan offers material tax cuts for everyone, eliminates federal taxes for those earning under $25,000 year ($50,000 for couples). So it appears that Clinton thinks these people are the “very rich.”
Further, Trump offers huge tax incentives and savings to help businesses expand and invest in America. The nonprofit, non-partisan Tax Foundation.org provided an analysis of the Clinton and Trump plans. The Tax Foundation’s analysis results Clinton losing 300,000 jobs, and Trump gaining 5.3 million in the first four years (graphic page top).
Trump’s plan is a huge boost for BOTH small and large businesses. Trump cuts the business tax rate by more than half, from currently 35% to 15%. Companies can retain their own cash to invest in their business which means jobs for the people.
Clinton’s plan seeks to increase unspecified taxes on U.S. business operating internationally, impose a risk fee if the government doesn’t like how a company is using their money, and end legal tax deductions on businesses the government doesn’t like. Nothing here is about job creation.
Higher taxes and more regulations in the Clinton plan is a poor-advised economic strategy. There is never been a government program in history that showed raising taxes on anyone created utopia.
About the author (in brief): NetAdvisor™ held nine licenses in the securities/investment and insurance industries; a designated 401(k) & Retirement Planning Specialist at a leading financial firm, a former branch manager, financial and corporate compliance officer, a risk management consultant with expertise in various complex financial matters, and is available as an Expert Witness. See background/bio.
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