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  • Good morning Hank, it's Tuesday.

  • So in Sunday's US presidential debate, a voter asked:

  • "What specific tax provisions will you change to ensure the wealthiest Americans pay their fair share in taxes?"

  • The candidates' answers were interesting, but limited.

  • So today I thought I'd take a look at Hillary Clinton and Donald Trump's tax plans.

  • But to do that, we need to understand the current US tax system, which unfortunately is not uncomplicated.

  • So let's imagine three married couples with two children a piece.

  • The Johnsons make the median household income of $52,000 per year.

  • The Kennedys make $300,000 per year and the Roosevelts make a million dollars a year.

  • Definition time. So your top marginal tax rate is the tax rate you pay on you last dollar of income.

  • For the Kennedys that's 33%.

  • But that's not actually the percentage of their income that goes to federal income taxes

  • because no matter how much money you make your first $18,450 of income

  • is taxed at 10%, the next 56ish thousand dollars is taxed at 15%

  • and so on

  • In the end, the Kennedys pay about $66,424 in federal income taxes under the current system

  • that's 22% of their income, that's their effective tax rate.

  • The Roosevelts, with their million dollars of income

  • pay about $336,500 in federal taxes

  • an effective tax rate of 33.6%

  • or .7 if you want to round up.

  • But God knows it can't be that simple

  • because usually families like the Kennedys and the Roosevelts pay less in taxes

  • due to deductions.

  • The U.S tax code allows you to deduct certain expenses from your income

  • like charitable donations, some retirement savings and mortgage interest

  • and you could either itemize your deductions by listing them

  • or take the so called standard deduction which is available to all taxpayers

  • for married couples filing jointly, it's currently $12,600

  • Ok, I know this is a little bit complicated but stay with me

  • lastly we have the Johnsons, with their income of $52,000 a year

  • the Johnson's can expect to pay $553 in federal income tax

  • an effective tax rate of just over 1%

  • Wait, what?

  • Right, so first the Johnsons take the standard deduction of $12,400 ($12,600)

  • which brings their taxable income down to $39,600 (39,400)

  • you also take a $4,050 personal exemption

  • for yourself, your spouse and your two kids. Thats $16,200

  • which brings the family's taxable income down to $23,200

  • they would pay about $2,553 of taxes on that income

  • EXCEPT, for child tax credits

  • there is 1,000 dollar tax credit for each dependent child you have

  • so thats how the Johnsons get down to $553

  • and I think this is really important to understand

  • because it underscores that for the half of American families making less than $52,000 a year

  • federal income taxes are quite low

  • in fact, a large majority of those households pay no federal income tax at all

  • they do pay lots of other taxes though

  • like payroll taxes, which neither candidate is proposing to change

  • and sales and property taxes which are local and therefore not under the purview of the president

  • but its really critical to remember that federal income tax policy can only do so much

  • Ok, so we're going to look at both these proposals mostly using analysis from the Tax Foundation,

  • which, for the record, is non-partisan but usually considered conservative leaning

  • let's start with Hillary Clinton's tax plan, which she described like this

  • "Nobody who makes less than $250,000 a year, and that's the vast majority of Americans as you know"

  • "will have their taxes raised"

  • "because I think we've got to go where the money is"

  • and thats accurate Clinton's plan mostly leaves the tax code unchanged

  • with four main differences

  • First, income over 5 million dollars per year which is currently taxed at 39.6%

  • would be taxed at 43.6%

  • there's a lower tax rate on capital gains

  • which is like sale of appreciated stock or of a business

  • and on capital gains over 5 million dollars, Clinton's tax plan would also increase that rate 4 %

  • from 20 to 24 %

  • Secondly households with over a million dollars in income

  • would have to pay at least a 30% effective tax rate

  • so basically they couldn't use deductions to get under a 30% tax rate

  • Third carried interest would be taxed like regular income

  • this is a little bit complicated

  • but basically carried interest allows many investment bankers

  • to claim most of their income as capital gains rather than as ordinary income

  • which means they pay lower tax rate

  • this would close this so called loophole

  • and lastly Clinton's plan would double the child tax credit

  • and also introduce a new $1,200 tax credit for caregivers

  • so if you're taking care of an elderly or disabled family member that credit would be available to you

  • there would also be some changes to the estate tax

  • and some corporate taxes would change in an attempt

  • to keep U.S companies from shielding their income from U.S taxes

  • so under the Clinton tax proposal neither the Kennedys nor the Roosevelts would see their taxes change

  • unless the Roosevelts are claiming hundreds of thousands of dollars in deductions

  • in which case their taxes might go up slightly

  • the Johnson's however would see their federal income tax rate go from

  • $553 a year to 0 because of the increase in the child tax credit

  • so just to be clear, at the debate when Donald Trump said

  • "She is raising everybody's taxes massively"

  • that's just not true for the vast majority of Americans

  • but there is a cost to tax increases even when they're only focused on the rich

  • they discourage investment and business spending

  • like the Tax Foundation says that the Clinton plan

  • would reduce overall U.S economic output by 1% over the long term

  • other projections have it much lower

  • but regardless it would have some effect

  • it would also of course create new government revenue

  • which would be used to pay for subsidized college,

  • infrastructure projects and paid family leave

  • most non-partisan analyses conclude that after accounting for all of this

  • the Clinton tax and budget proposal would add about $200 billion to the U.S debt over the next 10 years

  • Ok, lets talk about Donald Trump's new tax plan

  • which is quite different from the one he released in June and which I talked about here

  • at the debate he said "We're cutting taxes for the middle class"

  • "and I will tell you we are cutting them big league for the middle class"

  • so Trump's plan features three marginal tax brackets

  • for married couples filing jointly income up to $75,000 dollars a year would be taxed at 12%

  • from there up to $225,000 would be taxed at 25%

  • and above $225,000 would be taxed at 33%

  • he would also cap deductibles for married couples at $200,000 a year

  • he would make child care expenses deductible up to the average cost of childcare in your state

  • increase the standard deduction from $12,600 per year for married couples filing jointly

  • to $30,000 a year and he would get rid of personal exemptions

  • as you'll recall, those personal exemptions allow you to take $4,050 off your income

  • for each member of your family

  • eliminating them, even with the increase in the standard deduction

  • would mean that for many families with single parents of with more than three children

  • making between 60-100,000 dollars a year

  • taxes would actually go up somewhat under Trump's plan

  • this would be the case for about 7.8 million households

  • but for the rest of us our federal income taxes would stay about the same or go down under Trump's plan

  • like if we look at our three hypothetical families

  • the Johnsons would see their federal income taxes go from $553 a year to $400

  • the Kennedys, making $300,000 a year, would pay about $46,350 in taxes

  • a reduction of about $20,000 from the current system

  • and the Roosevelt's would pay about $287,250

  • as you can see the tax cuts are heavily concentrated on the wealthiest individuals

  • who pay the most income tax

  • Trump's plan would also decrease the corporate tax rate from 35% to 15%

  • and like Clinton's plan it would seek to get back some of the profits that are offshore from U.S companies

  • and it would close the carried interest loophole

  • in total, before accounting for macroeconomic effects

  • Trump's plan would lower revenue somewhere between 4.4 and 7.2 trillion dollars over the next 10 years

  • depending on who's doing the math

  • but, just as higher taxes can discourage investment

  • lower taxes can encourage it

  • and the Tax Foundation does project that Trump's plan would lead to growth

  • but no matter what you've heard that does not mean that tax cuts pay for themselves

  • They don't

  • for instance both the Reagan and the Bush tax cuts boosted growth

  • but they lowered federal revenues

  • the Tax Foundation, which remember, is conservative leaning

  • says that even after growth is accounted for, federal revenues will decrease under Trump's plan

  • between 2.6 and 3.9 trillion dollars

  • now Trump has proposed to pay for some of the shortfall, around 1 trillion dollars over 10 years

  • via budget cuts

  • but he also wants to spend 500 billion dollars more on the military over the next 10 years

  • so even the rosiest projections have Trump's total budget and tax plan adding about 2 trillion dollars

  • to the national debt over the next 10 years

  • that's 10 times greater than under Clinton's plan

  • and other projections like those made by the Tax Policy Center have that number at 7.2 trillion dollars

  • 36 times greater than Clinton's plan

  • I want to pause for a second to discuss why this could be such a huge problem

  • so currently the U.S.'s debt held by the public is about 77% of our total annual economic output

  • that's high but its not so high that people are worried about our ability to pay it back

  • we know that because interest rates on Treasury bills are near 0

  • it's basically seen as a guarantee that the United Sates will pay its debt

  • but if our publicly held debt to GDP ratio gets higher

  • traditionally when it gets to 100% or 110%, that might change

  • lenders might start to get nervous and think maybe the U.S can't pay its debts

  • which would make loans to the United States government riskier

  • which would make them more expensive

  • interest rates would go up to pay for the more expensive loans

  • the government would have to increase taxes or decrease spending

  • which would inhibit growth, which would lead to lower tax revenues

  • that would necessitate taking out more loans

  • with higher and higher interest rates

  • which would leave less money for programs like Social Security and unemployment insurance

  • which would further inhibit growth, which would lower government revenues

  • and pretty soon Greece

  • this is called a debt spiral and it is a catastrophe that once it starts is very difficult to stop

  • it often takes decades to unwind

  • now the chances of a debt spiral in the United States are very low no matter who becomes president

  • but the Non-Partisan Committee for a Responsible Federal Budget

  • has the 10-year debt from Trump's tax plan rising to 105% of GDP

  • and that is a very scary level

  • now I want to emphasize that there are serious and thoughtful republican tax and budget plans out there

  • but to cut taxes by the amount that Trump is proposing

  • it is necessary to cut either popular entitlement programs like Medicare

  • or else to cut defense spending dramatically

  • Serious republican budget proposals do one or both

  • and Trump's does neither

  • so in summary Donald Trump's tax plan would cut income taxes for most Americans

  • with the majority of the benefits going to the wealthiest households

  • and small increases on taxes for some middle class families

  • Hillary Clinton's tax proposals would cut income taxes for middle class families with children

  • the rest of us probably wouldn't see much change

  • but the wealthiest American households would have their taxes go up

  • if you'd like much more information

  • there are links to non-partisan analyses in the dooblydoo below

  • I'll also try to be in comments to answer any of your questions

  • and if you aren't yet registered to vote, or aren't sure if you are registered

  • please go to youtube.com/howtovoteineverystate

  • and find your state

  • in many states the registration deadline is today

  • so register. Please vote!

  • Hank, DFTBA. I will see you on Friday.

Good morning Hank, it's Tuesday.

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瞭解唐納德-特朗普和希拉里-克林頓的稅收計劃 (Understanding Donald Trump and Hillary Clinton's Tax Plans)

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    g2 發佈於 2021 年 01 月 14 日
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