Election Day is right around the corner, whether we are ready for it or not. One of the main points of contention for both parties is the topic of taxes: “will they increase, will they decrease, what does this mean for my family or business?” These are all valid questions and all somewhat unknown as election day approaches.
Although we may not know whether either candidate will be able get proposed tax law changes through Congress, here is a general synopsis of some of the stances they have taken regarding tax law changes for individuals and businesses.
The Tax Cuts & Jobs Act
One of the reasons for the heightened conversation around taxes during this election cycle is due to the sunsetting of multiple Tax Cut Jobs Act (TCJA) legislations established in 2017. In 2017, what was one of the highest tax rates globally, the business tax rate was lowed from 35% to 21%. The reason behind this staggering decrease was in an effort to increase “global competitiveness” of the US. The 21% rate has been made permanent, unless new legislation was to change it. On the individual side, the tax rate cuts established by TCJA were not permanent. In 2017 the highest tax rate for individuals had been decreased from 39.6% to 37% and the standard deduction increased significantly. With this being said, the new administration will be left with the question of what to do with the expiration of these tax cuts effective December 31, 2025.
Business Tax Platforms
The corporate tax rate is probably the biggest difference between Trump and Harris regarding their business tax proposals. Harris has proposed to increase the corporate tax rate from the current 21% to 28%. With this, she has stated she would also increase the corporate alternative minimum tax from 15% to 21%. Harris’s position is considered essential for ensuring that corporations play a more significant role in the economy.
On the other side, Trump has proposed to lower the corporate tax rate from 21% to 20%, with the possibility or lowering it even further to 15%. At the 15% rate proposed by Trump, this would rank the US as one of the most tax-competitive nations for businesses. As for sunsetting TCJA proposals (such as the 20% Section 199A pass-through business tax deduction and bonus depreciation), Trump has taken a position to make the TCJA provisions permanent.
Individual Tax Platforms
On the individual side of things, the candidates also have different stances regarding the marginal tax rate for individuals. As thing stand now, the top marginal rate is 37% for individuals with income over $609,350 and $731,200 for married filing jointly. Now, just as a reminder, these amounts are currently scheduled to increase with the sunsetting of TCJA. Trump has taken a position to make the current marginal tax rates permanent and no tax rate increases with the sunsetting of TCJA.
On the other hand, Harris has taken a position to increase the top marginal tax rate for individuals making more than $400,000 per year and couples making more that $450,000 per year to 39.6% indexed for inflation. Additionally, Harris wants to impose a 25% minimum tax rate on those with wealth of more that $100 million. Currently, individuals only pay taxes on assets that have appreciated in value (e.g., stock and real estate) once they have been sold at a gain. Under Harris’s proposal, individuals would also be taxed on the “unrealized increase” in value of assets. Many of the specifics under the Harris plan (i.e., what assets are exempt and the available exclusions) are forthcoming.
Agreement on Tip Income
Both sides have taken the same stance regarding one topic, the tax idea of exempting tip income for those in the service industry. Trump has taken it one step further and looks to exempt taxes on overtime and to remove the tax on Social Security benefits received by retirees.
Stay informed on the latest tax news
While nothing is set in stone, this is a brief overview of their differences between their proposed tax platforms. Various factors will impact the actual tax impacts of the next president, and we will keep you updated on any proposed tax law changes that may impact you or your business. Don’t miss a thing! Sign up to receive timely tax updates.
