We all know how the game is played. Politicians get on TV and most we find will say just about anything to gain a voter. How does anyone know who to believe any more?
With all the opinions people have on candidates, issues, plans, truth is most people never dig into the details themselves.
They just turn their television on and regurgitate what they hear without ever looking for themselves. That fact represents so much of the breakdown in our country because opinions flare based on influence and rhetoric, not actual fact.
So, that’s why we made a comparison of Hillary Clinton and Donald Trump’s tax plan to see how it would effect the average middle class tax payer.
Here’s the break down using $75,000 of taxable income.
Hillary Clinton’s website does not list a table of tax brackets and so you must assume that her rates will remain the same as it is currently and as it pertains to the middle class.
This places that salary in a 15% tax bracket (married filing jointly). The standard deduction is currently $12,600 which would bring the income of $75,000 down to $62,400.
Under Hillary this brings the federal tax bill to $8,432.50 per year. That’s around $700 per month or $325 a paycheck based on 26 pay periods.
Donald Trump places that same salary in a 12% tax bracket.
His standard deduction is $30,000 which reduces the $75,000 taxable income to $45,000.
Under Trump this would bring your federal tax bill to $5,400 per year. That translates to paying close to $450 a month in fed tax or around $220 per paycheck.
Donald Trump’s tax plan would put an extra $125.00 a paycheck in your pocket every paycheck. That’s almost $250.00 a month or $3,000.00 per year in extra money.
If you were to invest that $125 each paycheck into a mutual fund, one that say has a lifetime average rate of return of 13%, you would have almost two million dollars when you retire around 30 years from now, if you are 30 or so now.
An extra $3,000 can go an extremely long distance in most people’s households.
If you would like to look at both tax plans for yourself and crunch your own numbers, Hillary’s tax plan is here.
Trumps tax plan is here
These policies are sure to evolve if not flat-out reverse course over the next six months, so be sure to stop back for updates.
|Ordinary Income Tax Rates||10%, 15%, 25%, 28%, 33%, 35%, 39.6%, 43.6%||0%, 12%, 25%, 33%||Clinton plan would effectively retain the current tax brackets — which top out at 39.6% — but add a 4% surtax for taxpayers with income > $5M. Clinton would also retain Obamacare – which applies a 3.8% surtax to certain “net investment income” – meaning the top rate on such income would reach a high of 47.4%. Trump would repeal Obamacare, and his top rate of 25% would apply to all taxpayers with income > $300,000 ($150,000 if single).|
|Top Rate on Capital Gains||47.4%||20%||Under Clinton’s plan, a taxpayer earning more than $415,000 would have to hold a capital asset for six years before the top rate on capital gains would come down to 23.8%, where it stands under current law. Taxpayers with income > $5M would pay an additional 4% surtax, for a top rate for assets held > 6 years of 27.8%.|
|Itemized Deductions||Limits benefit to 28%||Steepens phase-out||Clinton would cap the maximum tax benefit of itemized deductions at 28%, meaning a taxpayer earning > $5M would effectively pay tax of 15.6% on his itemized deductions. Trump would steepen the phase-out of itemized deductions under the existing Pease limitation, which currently phases out deductions at 3% for every dollar that adjusted gross income exceeds $300,000 ($250,000 if single).|
|Alternative Minimum Tax||Adds “Buffett Rule” to existing AMT||Repeals AMT||The Buffet Rule would ensure that all taxpayers with income > $1M pay a minimum effective tax rate of 30%.|
|Estate Tax Rate||45%||0%||The estate tax rate currently resides at 40%.|
|Estate Tax Exemption||$3.5M||N/A||The exemption currently resides at $5.45M.|
|Corporate Tax Rate||?||15%||The top corporate rate is currently 35%.|
|Impact on 10-Yr Tax Revenue (Static)||>$500B||<$12T||You read that right. Trump’s proposals would reduce tax revenue by $12 TRILLION over the next ten years. In layman’s terms, that won’t help the deficit.|
|Impact on 10-Yr Tax Revenue (Dynamic)||>$200B||<$10T||Dynamic scoring simply means that taxpayers will change their behavior to respond to tax increases and decreases, and this scoring anticipates such behavioral changes.|
|Change in Full-Time Equivalent Jobs||<311,000||>5M||Lower business tax rates in the Trump plan will increase incentives to hire; lower individual tax rates will increase incentive to work.|
How will these policies impact your bank account? Here’s the breakdown from the Tax Policy Center where the below information comes from.
|Income Level||Tax Increase/(Decrease) Under Clinton Plan||Tax Increase/(Decrease) Under Trump Plan|
|>$23,099 < $45,153||$15||($969)|
|>$45,153 < $80,760||$44||($2,732)|
|>$80,760 < $142,601||$143||($5,369)|
|>$142,601 < $209,113||$246||($7,731)|
|>$209,113 < $295,756||$642||($11,476)|
|$295,756 < $732,323||$2,673||($27,657)|
|$732,323 < $3,769,396||$78,284||($275,257)|
As you can see, not much changes under the Clinton plan when compared to current law; that is, until you start pulling in more than three-quarters of a million dollars a year, in which case your tax bill will jump by nearly $80,000. And courtesy of the 4% surtax Clinton would add to taxpayers with income in excess of $5M, those taxpayers will see their tax bill jump by over $500,000.
The Trump plan offers tax savings at all income levels, with huge savings at the highest income levels resulting from the reduction in the top rate from 39.6% to 25%.