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A Non-Partisan Comparison of Presidential Candidate Tax Plans

Just over a month away is the election for the 45th President of the United States. No matter which side of the aisle you find yourself on, there is no doubt that each candidate has proposed some substantial tax legislation changes. Here is a comparison of the candidates tax plans:

Hillary Clinton’s Plan:  

• “Fair Share Surcharge” – A proposed 4% increase to the top tax rate of 39.6% for individuals making over $5,000,000 per year. All other tax rates for individuals would remain constant.

• Closing loopholes – Strengthening the Buffet Rule and broadening the base of income subject to the rule, closing Bermuda reinsurance loophole and the “Romney Loophole”, and closing the “step up in basis” loophole.

• Closing the “Carried Interest” Loophole – Loophole which allows hedge fund managers to avoid ordinary income tax rates for earnings.

• Restore Estate Tax to 2009 Parameters($3,500,000 Estate exemption, 45% tax rate) with rates increasing to as much as 65% on estates over 1 billion.

• Ensure millionaires pay a minimum tax rate of 30%.

• Impose a “risk fee” on the largest financial institutions.

• Corporate tax rate will remain at 35%.

 

Donald Trump’s Plan:

• Reduce tax rates for individuals from 12% for Married Filing Jointly (MFJ) filers under $75,000, to a maximum of 33% for MFJ filers over $225,000. Single filers would be half of these numbers.

• Retain current capital gains rates(max of 20%).

• Repeal net investment income tax of 3.8%.

• Increase standard deduction to $30,000 for MFJ, and get rid of personal exemptions.

• Cap itemized deductions at $200,000.

• Repeal Estate Tax unless capital gain assets valued over $10,000,000 were held until death, disallow private established charity donations.

• Above-the-line deduction for childcare for children under 13, capped by states per child. Not available to MFJ taxpayers over $500,000.

• Spending rebates for childcare expense to certain low-income taxpayers through the Earned Income Tax Credit (EITC).

• Cut corporate tax rate from 35% to 15%, and provide 1 time repatriation of offshore funds for a 10% tax rate.

 

Each tax plan is diametrically opposed from the other, but both will change the tax planning efforts that accountants will need to have to properly advise clients in the coming years. To view the tax plans in full detail, click on each candidates name to connect to their websites.

 

 

The Harvard Business Review recently published an article outlining an interesting strategy which should make negotiations more civil, speedy and fair.

The authors have proposed an approach they call the “final-offer arbitration challenge” for reaching fair agreements efficiently.

It works like this. If the other side’s position is unreasonable, one’s initial reaction is often to be just as unreasonable, believing that the issue will be resolved somewhere in the middle, and thus be reasonable. This may ultimately be the result but often only after investing a lot of time and money to get there. It stands to reason that if the parties come to a negotiation with realistic starting positions, the negotiations that follow should be relatively civil, speedy and fair.

But how can a negotiator who wants to be fair at the outset be sure that his or her counterpart will do the same? This is where the “final-offer arbitration challenge” can help to reach fair agreements efficiently. It works like this: To encourage reasonableness, one side should make their offer demonstrably fair from the outset. Then, if the other side is unreasonable, they should be challenged to take the offers to an arbitrator who must not compromise, but must choose one or the other offer. This approach should result in offers that are more aligned from the beginning. Thus it is to everyone’s benefit if the parties come to the negotiations with reasonable offers in hand.

This is not unlike the way thoughtful parents have resolved disputes between two siblings. Have one cut the last piece of cake in half, and have the other choose first.

 





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