Donald Trump's Tax Plan

Last week, we looked at Hillary Clinton’s tax plan. This week, we look at Donald Trump’s tax plan.

First, estate taxes. Donald Trump would completely up-end the current transfer tax system:
•    He would eliminate the estate tax entirely.
•    He would eliminate the gift tax entirely.
•    Presumably, he would eliminate the GST tax entirely.
•    He would disallow a step-up in basis for the assets of decedents with estates over $10 million.

Next, income taxes. Donald Trump’s tax proposals are not entirely clear and change. However, he has proposed the following:

•    Cap deductions at $100,000 for individuals and $200,000 for a married couple filing jointly.
•    Increase the standard deduction to $15,000 for individuals and $30,000 for married filing jointly.
•    Reduce the federal tax brackets from 7 to 3, with rates of 12%, 25%, and 33%.

Current estimates are that Trump’s tax plan would:

•    Reduce taxes for low income earners by an average of 1.2%.
•    Reduce taxes for highest income earners by 10.2%.

Hillary Clinton’s Tax Plan

The candidates’ standings in the polls go up and down. But how would each of them affect you and your estate planning? This week we look at Hillary Clinton’s tax plan and next week we will examine Donald Trump’s tax plan.

First, estate taxes. Hillary Clinton would keep the estate tax. In fact, she would enhance it by returning it to the 2009 law:

• Reduce the applicable exclusion to $3.5 million

• Increase the rate of taxation from 40% to 45%

• Reinstate the $1 million lifetime gift exclusion

Next, income taxes. Hillary Clinton has detailed income tax proposals, including the following:

• Small business can deduct up to $1 million in capital investment

• Institute the Buffett rule, i.e. taxpayers with income above $1 million would pay a minimum 30% effective tax rate

• Impose a 4% surcharge for taxpayers earning above $5 million

• Eliminate the “carried interest” loophole

• Graduated rates for capital gains based on holding period (Holding up to 2 years, ordinary income rates apply; 2-3 years, 36%; 4 years, 32%; 5 years, 28%; 6 years, 24%; 7 or more years, 20%)

The Tax Policy Center estimates that the top 1% of taxpayers with incomes above $750,000 would face average tax increases of $78,000 under the proposed Clinton plan. Those earning less than $300,000 would face no increase.

According to a piece in the New York Times, Clinton’s plan would add complexity to tax laws.

Next week, I’ll look at how Donald Trump’s plan would affect estate planning.