10 Differences Between Clinton and Trump Tax Plans

Here is a summary of the top 10 differences between the Clinton and Trump tax proposals as outlined in their various position papers and on their web sites:

  1. Individual Tax brackets – Clinton would create 8 tax brackets with a new top tax rate of 43.6% on income in excess of $5 million. Trump would have 4 tax brackets and reduce the top tax bracket to 33%.
  2. Long-term capital gains – Clinton would increase the top tax rate on capital gains to 39.6% for assets held less than 2 years and the cap gains rate would decline to 20% as assets are held longer (20% for assets held at least 6 years). Trump would keep the 1-year holding period to qualify for lower long-term capital gains rates.
  3. Net Investment Income (NII) Tax – Clinton would retain the NII tax of 3.8% and expand it to include certain business income. Trump would repeal this tax, which was enacted as part of the Obama health care plan.
  4. Buffett Rule – 30% Minimum Tax  Clinton would enact a minimum 30% tax rate for those with income of at least $1 million. Trump does not have a similar proposal.
  5. Estate Tax – Clinton would impose a 65% tax rate on individuals with estates in excess of $500 million (married couples with estates of greater than $1 billion) and would role back exemptions to $3.5 million per person (currently $5.45 million) and increase the estate tax rate to 45% from its current 40% level.  Clinton also would tax unrealized gains at death (currently, taxpayers can step-up the basis of their assets at death allowing heirs to avoid capital gains on inherited assets). Trump would repeal the estate tax.
  6. Gift Tax – Clinton would retain the current gift tax structure, and continue to allow folks to give away $14,000 per donee per year. Trump would repeal the gift tax.
  7. Corporate income tax – Clinton would keep the corporate tax rates where they are (between 15-39%) and would make certain other business tax changes that raise revenue (including expanding the NII to include self-employment and other business income). Trump would lower the top corporate income tax rate to 15%.
  8. Itemized deductions – Clinton would limit the ability of taxpayers to claim itemized deductions to a maximum tax benefit of 28%. Trump would limit the ability to claim interest expense deductions.
  9. Carried interests – “Carried interests” generally are a share of the profits of an investment paid to the investment manager in excess of the amount that the manager contributes to the business, heavily used in alternative investments and real estate ventures (e.g., venture capital, private equity and hedge funds). Both Clinton and Trump would tax income from carried interests as ordinary income, instead of capital gains.
  10. Cadillac Plan Surtax – Currently the Affordable Care Act (ACA) imposes an annual 40% excise tax (referred to as the “Cadillac Plan Tax”) on plans with annual premiums exceeding $10,200 for individuals or $27,500 for a family starting in 2018, to be paid by insurers. Clinton would retain this tax. Trump would repeal the ACA and replace it with an as-yet unannounced alternative.