As the November 2024 presidential election draws near, the tax policies of the two presumptive candidates, Joe Biden and Donald Trump, are at the forefront of economic discussions. Both candidates propose vastly different approaches to taxation, reflecting their broader economic philosophies. These policies not only signal the future direction of the U.S. economy but also have direct implications for businesses, individuals, and the overall fiscal health of the nation. Here's a comparative analysis of Biden and Trump's tax proposals.

 

Joe Biden

Joe Biden's tax policy under his proposed budget for fiscal year 2024 emphasizes increasing tax rates on corporate, individual, and capital gains income. Additionally, Biden aims to expand tax credits for workers and families and broaden the tax base to include more types of income.

 

Business Taxes

• Increase in Corporate Taxes:  Biden proposes raising the corporate income tax rate to 28%, aiming to fund infrastructure and social programs.

 

• Increase GILTI tax rate & repeal FDII deduction:  The plan includes increasing the global intangible low-taxed income (GILTI) tax rate from 10.5% to 21% and repealing favorable tax rates on foreign-derived intangible income (FDII).

 

• Expansion of Investment Income Tax:  The proposal extends the net investment income tax to cover nonpassive business income and increases taxation on the fossil fuel industry.

 

Individual Taxes

• Limit favorable long term capital gains tax rate:  For incomes above $1 million, long-term capital gains and qualified dividends would be taxed at ordinary income tax rates. Additionally, a minimum effective tax rate of 20% on an expanded measure of income for households with net wealth above $100 million is proposed.

 

• Estate and Wealth Taxes:  Biden's policy includes tightening rules related to the estate tax, aiming to prevent wealth accumulation through inheritance.

 

• Expansion of Tax Credits: The Child Tax Credit and Earned Income Tax Credit would see significant enhancements, alongside an expansion of premium tax credits.

 

• Individual Income Tax Rate Increase: An increase in the top individual income tax rate to 39.6% for high earners and an extension of certain TCJA tax changes for those making under $400,000.

 

Donald Trump

Donald Trump's tax policy focuses on maintaining low tax rates, particularly for businesses and high-income individuals, and implementing aggressive tariffs, especially against China.

 

Business Taxes

• Maintain Corporate Tax Rate:  Trump intends to keep the corporate income tax rate at 21%, maintaining the TCJA level.

 

• Estate Tax Cut: The plan includes making the TCJA's estate tax cuts permanent, benefiting high-net-worth estates.

 

• Import Tariffs:  A notable policy is the imposition of a universal baseline tariff on all U.S. imports and a significant 60% tariff on imports from China, aiming to encourage domestic production and address trade imbalances.

 

Other Proposals

• Taxation of University Endowments:  Trump proposes taxing large private university endowments, targeting institutions that he perceives as having significant untaxed wealth.

 

The tax policies of Joe Biden and Donald Trump present clear contrasts in their vision for America's economic future. Biden's approach focuses on increasing tax rates for higher earners and corporations to fund social programs and infrastructure, aiming for a more equitable tax system. On the other hand, Trump's strategy emphasizes low taxes to spur economic growth and aggressive tariffs to correct trade imbalances. As voters head to the ballot box in November 2024, the economic implications of these policies will undoubtedly play a crucial role in their decision-making process.