📰 This week in business mgmt: Trump v Biden on taxes — Chicago Blackhawks stars among victims of fraud by Illinois accountant —”Tenet” makes $20.2 million in ticket sales
Trump vs Biden on Taxes
The candidate who will emerge as the winner of the Presidential election come November will be tasked with navigating a myriad of ongoing challenges, including calls for social justice reform, tensions with China and Russia, and of course, leading the health system in the fight against the ongoing worldwide pandemic.
However, one of the most important issues the commander-in-chief will spend time on is the economic recovery, as jobless claims still exceed 1 million per week, with experts claiming that the economic risks are far from over.
Importance of Taxation
The key to solving the problem will be the issue on taxation. Rob Mander, head of international tax at RSM International in London, writes for Bloomberg Tax that the pandemic has demonstrated the crucial role that tax plays in our society.
“When there is a sudden shock, it is taxes that allow governments to respond to them in the best interests of society.” Mander goes on to say that following the global recession in 2008, the recovery relied heavily on taxation increases and spending cuts.
“However, the government response to pandemic has required much higher levels of spending that will require far greater changes to the tax system than the increases we saw in 2009,” Mander says.
Trump’s vs. Biden’s approach
It is exactly on the question of taxation, particularly for individuals with deeper pockets, where President Trump and former Vice President Biden show stark differences in their tax approaches.
Though not as radical as Senators Bernie Sanders or Elizabeth Warren, Biden has proposed an increase in taxation to corporations. When compared to Hillary Clinton’s 2016 campaign, his plan would add three times more tax money (over $3 trillion as opposed to Clinton’s $1 trillion).
Taxes on Top Earners
According to the American Enterprise Tax Institute, the top 1% of earners who make a taxable income over $400,000 would face the largest tax increase with Biden’s proposed plan, an estimated 17.8 percent reduction after getting taxed. The analysis states that 72% of the new tax revenue for 2021 would come from the top 1% of tax filers.
On the other hand, Barron writes that “Trump’s plan thus far is limited to endorsing the idea of payroll-tax reductions, tweets about a potential capital-gains tax cut, and vowing to extend the Tax Cuts & Jobs Act, or TCJA, which went into effect in 2018 and is set to expire at the end of 2025.”
It further states that “overall, his [Trump’s] message is one of easing taxes, mostly on the wealthy.”
While Trump hasn’t put out a specific new tax plan, his Tax Cuts and Jobs Act of 2017 (TCJA), however, lowered the top income tax bracket rate from 39.6%to 37%, and seems like he might want to extend TCJA even further.
While under the TCJA, the peak marginal corporate tax rate was slashed from 35% to 21%, the Biden tax plan would increase it to 28%.
On the other hand, Trump’s top economic adviser Larry Kudlow said in May of this year that the White House floated cutting taxes to 10.5% for corporations that bring back their supply chain from overseas.
Below is a chart by wealth management, trust, and private banking company Boston Private that briefly summarizes the most important differences between Biden’s and Trump’s approach, and what taxpayers could expect to see after the upcoming elections.
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