With the House Democrats’ formal impeachment inquiry for President Trump in motion and the recent poll showing increasing support for impeachment proceedings and his declining approval rate, we need to start thinking about potential tax policy changes should a Democratic candidate takes over the Whitehouse. Joe Biden, Bernie Sanders and Elizabeth Warren are the three leading 2020 Democratic Presidential candidates, and here is what we know about their tax policy.
Joe Biden
To help finance expanding healthcare coverage and free community college for students, Biden plans to reverse the Tax Cuts and Jobs Act’s (TCJA) tax cuts for the wealthy by restoring the 39.6% top marginal tax rate, up from the current 37%. Biden also plans to increase the capital gains tax rate from 20% to 39.6% for those who make over $1 million. Furthermore, Biden suggests reforming the estate tax system to eliminate the stepped-up of basis of assets passed on to heirs of estates. Separately, Biden plans to raise the corporate tax rate from 21% to 28%.
Bernie Sanders
To finance his Medicare for All plan, Sanders plans to require employees to pay a 4% income-based premium and require employers to pay a 7.5% premium. Additionally, Sanders plans to raise the income tax to 70% on the portion of individual income in excess of $10 million and raise the current 20% top rate on long-term capital gains and dividend income to 37%. Sanders also plans to introduce a new net worth tax – which assess a 1% tax on net worth above $32 million and 8% on net worth over $10 billion. He will also significantly increase the estate tax rate from 40% to 45% on the estate between $3.5-$10 million; to 50% for the portion of estate between $10-$50 million; to 55% for the portion of estate between $50 million and $1 billion; and 77% for the portion above $10 billion. Additionally, Sanders plan to discontinue the current tax incentives available for the US companies generating foreign income.
Elizabeth Warren
To finance for universal childcare, free public college and cancellation of all student debt, Warren plans to introduce the Ultra-Millionaire Tax. This new tax applies only to households with a net worth of $50 million or more—roughly the wealthiest 75,000 households, or the top 0.1%. Households would pay an annual 2% tax on every dollar of net worth above $50 million and a 3% tax on every dollar of net worth above $1 billion. Additionally, she plans to increase the social security contribution to 14.8% for the individuals with more than $250,000 wage or investment income. Warren also to plans to repeal most of corporate tax law changes enacted as of part of the 2017 Tax Cuts and Jobs Act and roll back the legislation and restore the previous corporate tax rate.
It’ll be months before the first Democratic primary ballot is cast, but taxpayers should be aware of the potential changes and keep updated on the tax policies of the leading candidates.