Will Taxes Be Higher Under Biden Or Trump? Proposals Compared

President Donald Trump accuses Democratic rival Joe Biden of planning to raise everyone’s taxes substantially, claiming Biden will push rates to historic highs – something Biden denies, adding he’s only planning to raise taxes on those making $400,000 or more, less than 1% of taxpayers.

Trump, on the other hand, wants to expand tax breaks and create more tax cuts but has yet to release specific details.

So, what to the rival tax plans mean for an individual’s bottom line?

The Tax Foundation think tank concluded the Biden plan would impose the highest tax rates since the Tax Reform Act of 1986, which reduced the top marginal rate from 50% to 28%, and the highest federal rates since 1981. From 1944 through 1963, the highest marginal tax rate for individuals was 91% or 92%.

Biden has said he would roll back the tax cuts in the 2017 Tax Cuts and Jobs Act, which in 2018 lowered tax liability for everyone except those in the lowest and second-highest tax brackets. The nation’s total tax bill fell 4% to $1.552 trillion. The Biden campaign said 83% of the benefits went to the top 1% of taxpayers.

Biden has said he wants to repeal those cuts, limiting the value of itemized deductions to 28%, raising the top tax rate to pre-2017 levels for households making more than $400,000 a year and increasing corporate taxes from 21% to 28%, with a minimum tax on book income. The child and dependent care credit would be increased temporarily, and the first-time homebuyers’ tax credit would be reestablished.

An analysis by the Tax Foundation found the Biden plan would lower after-tax income by 1.7% by 2030 (6.5% for the top 1% of taxpayers), raise more than $3 trillion in revenue over a decade and lower the gross domestic product by 1.47%.

The plan also addresses Social Security, imposing a $12.4% payroll tax for those earning more than $400,000. Right now, Social Security taxes are capped at $137,700 in earnings.

For businesses, the Biden plan would establish a manufacturing communities tax credit to reduce liabilities when the closure of a government institution impacts a community’s workforce, expand the new markets tax credit and make it permanent, offer tax credits to small businesses that offer retirement plans and expand several renewable energy-related tax credits.

Biden also wants to increase capital gains taxes to 39.6% for those with income exceeding $1 million. He also wants to reduce the amount an individual can pass tax free after death from $11.58 million to $3.5 million before a 40% estate tax kicks in, and to tax unrealized gains at the time of death.

By comparison, Trump’s tax plans are light on details. He has said he wants to cut taxes to boost take-home pay but has yet to detail which taxes he’s talking about. One idea that has been bouncing around since 2018 is lowering the marginal income tax rate to 15% from 22%.

Trump called for the temporary suspension of payroll taxes – which make up more than 23% of federal, state and local revenue – for those earning less than $104,000 – but the proposal was voluntary and the taxes would need to be paid back at some point unless the deferral was made permanent.

Trump also favors cutting capital gains taxes “specifically for middle income families.”

Trump wants to expand Opportunity Zones, providing tax incentives to companies and individuals who invest in blighted areas, and would allow 100% expensing for some industries that bring jobs back from China, but it was unclear what deductions would be allowed or whether the proposal would be permanent.

“Full expensing is a highly cost-effective tax reform to boost growth, but limiting the policy to specific industries is not ideal. It would be more economically beneficial to broadly improve cost recovery across all industries,” the Tax Foundation said.

Many of the cuts in the 2017 legislation expire in coming years, and Trump has yet to say how that would be addressed.

It also is unclear how Trump would approach tariffs during a second term.