Comparing Tax Proposals: Kamala Harris vs. Donald Trump
As the presidential race heats up, it’s crucial to understand the tax proposals from the leading candidates, Kamala Harris and Donald Trump. While these proposals reflect their visions for the country’s economic future, it’s important to remember that any changes would require approval from Congress. Here’s a breakdown of what each candidate is proposing:
Kamala Harris’s Tax Proposals
Individual Income Tax:
- Net Investment Income Tax: Harris proposes increasing this tax from 3.8% to 5%.
- Surplus Medicare Tax: This would rise from 0.9% to 2.1% for high earners, affecting those with incomes over $200,000 (single) or $250,000 (joint).
- Top Income Tax Rate: The top rate of 39.6% would apply to incomes over $400,000 for single filers and $450,000 for joint filers.
- Retirement Contributions: High-income taxpayers with large IRA or retirement plan balances may face limits on their contributions.
- 1031 Exchanges: The deferral of gains would be limited to $500,000 per transaction for real estate or oil and gas investments.
Credits and Deductions:
- Child Tax Credit: Harris aims to make this credit fully refundable and increase it to $3,600, extending the $3,000 credit for older children.
- Earned Income Tax Credit: She proposes increasing this credit for workers without qualifying children.
- Premium Tax Credits: These would be expanded on a permanent basis.
Capital Gains and Dividends:
- Tax Rate: Long-term capital gains and qualified dividends would be taxed at ordinary income rates for those with taxable incomes over $1 million.
- Unrealized Gains at Death: Harris proposes taxing these gains above $5 million (single) or $10 million (joint), with a minimum effective tax rate of 20% for estates over $100 million.
Corporate Taxes:
- Corporate Tax Rate: The flat rate would increase from 21% to 28%.
- Net Investment Income Tax: This 5% tax would apply to all non-passive business income.
Donald Trump’s Tax Proposals
Individual Income Tax:
- Tax Cuts and Jobs Act: Trump proposes making the current provisions permanent, eliminating the sunset clause.
- Tariffs: He suggests increasing tariffs to replace some income taxes.
- Tips: Both candidates have mentioned exempting tips from income tax.
Credits and Deductions:
- No Changes Proposed: Trump does not propose any changes in this area.
Capital Gains and Dividends:
- No Specific Changes Proposed: Trump has not outlined specific changes for capital gains and dividends taxes.
Corporate Taxes:
- Corporate Tax Rate: Trump proposes lowering the rate from 21% to 15%.
Impact on Middle-Income Families
Kamala Harris’s Proposals:
- Positive Impacts: Expanded child tax credit, increased earned income tax credit, and expanded premium tax credits would benefit middle-income families.
- Potential Negative Impacts: Higher taxes on investment income and limits on retirement contributions could affect some middle-income earners.
Donald Trump’s Proposals:
- Positive Impacts: Making the Tax Cuts and Jobs Act permanent would maintain lower tax rates and higher standard deductions.
- Neutral Impact: No changes to credits and deductions mean middle-income families would continue to benefit from existing provisions.
Impact on 1099 Workers and Business Owners
Kamala Harris’s Proposals:
- Net Investment Income Tax: Increasing this tax to 5% and applying it to all non-passive business income would directly impact 1099 workers and business owners, potentially increasing their tax burden.
- Surplus Medicare Tax: The increase from 0.9% to 2.1% would affect high-earning self-employed individuals.
- Corporate Tax Rate: Raising the corporate tax rate to 28% could increase the tax liability for business owners operating as corporations.
- Retirement Contributions: Limits on contributions for high-income taxpayers with large balances could affect business owners’ retirement planning.
Donald Trump’s Proposals:
- Tax Cuts and Jobs Act: Making the provisions permanent would benefit 1099 workers and business owners by maintaining lower tax rates and favorable deductions.
- Corporate Tax Rate: Lowering the corporate tax rate to 15% would reduce the tax burden on business owners operating as corporations.
- Tariffs: Increased tariffs could impact business owners who rely on imported goods, potentially increasing costs.
These proposals highlight the stark differences in tax policy between Kamala Harris and Donald Trump. Harris focuses on increasing taxes for high earners and expanding credits for lower-income individuals, while Trump aims to maintain or reduce current tax rates and make existing tax cuts permanent. As always, these proposals would need to pass through Congress to become law, so stay tuned for further developments.
If you’d like to dive deeper into these tax proposals, be sure to check out our webinar on the topic
And if you think it’s time to get your tax planning in order, contact us today. Remember, it’s never too late to start, but tomorrow might be. Let us help you secure your financial future and navigate these potential tax changes with confidence.