By The Numbers: Candidate Tax Plans

By Philippa Haven ‘17
Staff Writer

With tax season officially behind us, we can all breathe a sigh of relief knowing our W2 forms are filled out and filed away. Taxes are overall an unpleasant entity: for one, it is hard to see deductions from paychecks well earned, and two, the system is so confusing an entire industry is dedicated to helping people decipher what they owe the federal government. Taxes are also a highly politicized and highly debated topic among the remaining four Presidential candidates. Before their tax plans are laid out, a brief summary of the current tax plan should be understood.

Individual income taxes account for 47% of federal revenues, by far the largest source of federal revenue (payroll taxes are the second largest source, making up 34% of federal revenue.) The United States has a progressive income tax system, meaning that as your income increases, so does your tax rate. Currently, you are in the bottom bracket if your salary is from $0-$9,275 and you pay the lowest tax rate, 10%. The average starting salary for a college graduate was $45,478 in 2014, and their federal tax rate would be 25%.

Hillary Clinton’s tax plan changes these brackets and tax rates very little. She does add a 4% surtax on income over $5 million, and creates a new tax credit of up to $1,200 for caregivers. Bernie Sanders raises every tax rate by at least 2.2%, with the biggest tax rate increases on those who earn the highest incomes. Ted Cruz has the most creative tax plan: he hopes to establish a flat tax rate of 10%, for people of all incomes in order to simplify the 75,000 page tax code and abolish the IRS. Donald Trump establishes 4 brackets of 0%, 10%, 20%, and 25%, the top rate applying to income over $150,000 (currently, the top rate of 39.6% applies to those with minimum incomes of $415,050.)

So while Clinton’s tax plan is very much in line with the current system, her tax increases for those earning seven figure salaries are projected to increase .5% to GDP over a decade. This is minimal compared to Sanders’ tax plan, which by increasing tax rates across all income groups, with the highest earners owing over 40%, would increase GDP by 6.4% ($15 trillion). Cruz’s tax plan benefits the wealthy even more than Trump’s plan, and would also add around $50 to middle class workers’ biweekly paychecks ($1,300 per year). His plan would actually decrease GDP by 3.6%, a little less than Trump’s plan which would decrease GDP by over 4%, about $9.5 trillion.

Tax Plans:

Hillary Clinton: would change little from our current tax plan, but increase taxes for very high earners by 4%  

Bernie Sanders: would raise every tax rate by at least 2.2%, more for the highest incomes

Ted Cruz: would tax everybody at 10% and abolish the IRS

Donald Trump: would tax all income over $150,000 at 25%


Tax plans might seem dry and non-relatable; however, not only do they affect every American, but they also are very valuable in learning how the candidates approach other fiscal policies. For example, both the Republican candidates lower the tax rate because they believe Americans should keep more of their paycheck, and either spend it or save it using their own discretion. Clinton, and particularly Sanders, believe some programs should be public goods, such as college and health care, and therefore paid by the revenue the federal government incurs from individual income taxes. Their views on the role of the government and perception of what is best for Americans are evident in their tax plan. Which tax plan is best for you? It depends on what you value: Trump’s plan would put the most money in your pocket, for his tax plan adds up to $1 trillion in tax savings for workers per year. However if you would spend those savings on college and health care, perhaps Sanders’ tax plan is best.  

Sources:

taxpolicycenter.org/taxvox/current-law-distribution-taxes

taxfoundation.org/article/2016-tax-brackets
time.com/money/3829776/heres-what-the-average-grad-makes-right-out-of-college/

taxfoundation.org/comparing-2016-presidential-tax-reform-proposals

ibtimes.com/paycheck-calculator-how-will-presidential-candidates-change-your-tax-bill-2332826

apps.urban.org/features/tpccandidate/