Grand Canyon-esque is the gap between presidential candidates regarding tax programs.
That may be an understatement.
Donald Trump is keen to keep the 2017 tax cut. His campaign claims that it led to investments that helped lower unemployment to 3.5% prior to the pandemic. Critics claim that the tax cut ballooned deficit and gave most benefits to the rich.
Democrat Joe Biden proposes to reverse some of the cuts in order to increase revenue and, according his words, “… make those who are the most wealthy pay their fair share.
The difference in approach won’t have much impact on most voters. Only a small percentage of voters will be able to choose between the two proposals.
Trump would like to maintain the tax cuts and increase the maximum capital gains rate. This will help the wealthiest investors. Biden will not raise personal income taxes for those earning more than $400,000; most analysts believe this is the top 1% to 2% of wage earners.
Trump’s 2017 Tax Cut Plan
Trump has not published a formal tax plan. The Republican party did no create or publish a platform at their 2020 convention. Other than declaring that it was continuing Trump’s work, the Republican party didn’t put together or release any platform. This leads him to believe in the Tax Cuts and Jobs Act 2017, which is the most significant legislative achievement of his first term.
The problem is that the law was passed without any votes from Democrats. This is not ideal. Barack Obama passed the Affordable Care Act without a Republican vote. Republicans tried for years to repeal it. If Democrats win control of the Senate in 2020, it is possible that the same thing could happen to Tax Cuts and Jobs Acts.
Trump’s campaign boasts loudly about the tax bill’s benefits. It provided tax relief to 82% of middle-class families, according to the campaign. The standard deduction was raised to $24,800 for married filers. The Child Tax Credit was also doubled to provide an additional $1,000 tax relief to working parents. Small business taxes were also cut 20%.
Tax Cut Criticism
Biden and the Democrats don’t hesitate to criticize the tax cuts. They claim that they benefit corporations and wealthy individuals and do little for average Americans.
Biden claims that 83% of benefits went to the highest earners. Americans for Tax Fairness supports this claim. In September 2020, it reported that the bill had a net effect of $50,000 on the wealthiest 1% while the average income of the lowest 80% earned $645. Trump said to Mar-a-Lago members that they had all “just got richer” when the bill was passed.
Will Biden Increase Taxes?
Yes, Biden will increase taxes for those who earn more than $400,000 per year in personal income.
Independent fact-checkers have found that the claim that Biden will increase taxes on all Americans is false. PolitiFact and USA Today, as well as the Committee for a Responsible Federal Budget, all reject this assertion.
This is how the Biden campaign summarizes key elements of its tax strategy:
Trump’s 2017 tax bill, which raised the top bracket to 37% from 39.6%, would be reversed
Increase the corporate tax rate to 21 percent from 28 percent. This would roughly split the difference between Trump’s reduction of it from 35% in 2017 and Trump’s raising it to 28 percent.
Social Security Security
Social Security trust fund’s future stability will depend on how the payroll tax is handled and what plans are made to replace it.
Trump’s pandemic relief executive orders allowed earning workers to defer payroll tax until 2020. In August, the Social Security Administration Chief stated that the trust fund would be completely depleted by 2023 if payroll taxes were cut to zero. Trump was contacted by the AARP, representing 38 million Americans who are retired, to clarify his plans. He stated that Social Security is “arguably the most important program in our country’s history” as well as “the largest source for retirement income for most Americans”.
Congress would need to approve any plan to reduce or eliminate the Payroll Tax. This is because of the importance of Social Security for seniors.
Assessment of the Deficit
Trump’s deficits between 2017 and 2020 totaled $3.5 trillion, before spending to assist those affected by COVID-19 which added $2.6 trillion for an overall total of $6.1 trillion. Obama’s first four years saw deficits of $5 trillion. This was partly due to the 2008 recession.
Trump promised to end the debt within eight years when he ran for office in 2016. According to the Congressional Budget Office, Trump’s nation debt has risen by $6.6 trillion to $26 trillion.
The major reasons for the increase in debt are: Record defense spending, record spending to help people affected by the COVID-19 pandemic, and the tax cut bill.