Trump vs Biden: What Are Their Stances On Tax Reform?

Learn about the key differences between Donald Trump and Joe Biden's approaches to tax reform.
President Donald Trump (AP) and former Vice President Joe Biden (Kuhlmann/MSC/Creative Commons)

President Donald Trump (AP) and former Vice President Joe Biden (Kuhlmann/MSC/Creative Commons)

What is Donald Trump’s tax plan?

Donald Trump has not released any tax plan for his reelection bid. In November of 2019, Trump advisor Larry Kudrow suggested Trump might create cuts targeted to the middle class, but the candidate has released no concrete plans. In the light of the novel coronavirus global pandemic, Trump has suggested payroll cuts, but only through November or December of this year, though some cuts, he suggests, could extend onward. No legislation or formal proposal is currently available, and changes to the tax code require an act of Congress.

What is Donald Trump’s record on tax reform?

Crafted by a Republican House and Senate, the Tax Cuts and Jobs Act of 2017 (TCJA) was signed into law by Trump on December 22, 2017. The law reshaped the tax code, substantially increasing the standard deduction while eliminating or limiting most itemized deductions and capping deductions for property, state, and local taxes at $10,000. It got rid of the dependent deduction, replacing it with a child credit also available to higher-income taxpayers. Most taxpayers saw a rate decrease, with a shift in tax brackets. The personal changes expire in 2025.

The real winners of the TCJA were corporations, with a rate cut from 35% to 21% and a repeal of the alternative minimum tax (AMT), along with a myriad of new deductions and breaks. Nearly all corporate tax changes are permanent. While the Trump Administration argued that this would trickle down to workers, a significant amount of the extra cash flow went to stock buybacks.

Overall, with estate tax breaks, changes to the individual AMT, and changes to the calculation of capital gains and the net investment income tax (NIIT), high earners also did well. From the nonpartisan Institute on Taxation and Economic Policy (ITEP):

“...most of the benefits of TCJA go to the rich. ITEP’s most recent analysis estimates the richest 5 percent of taxpayers will receive $145 billion in tax cuts in 2020, which is half of the law’s benefits that go to U.S. taxpayers. The richest 20 percent of taxpayers will receive $205 billion in 2020, which is 72 percent of the law’s benefits that go to U.S. taxpayers.”

Contrary to the Trump Administration’s claims, this drastically increases government deficits and the doesn’t provide the growth necessary to offset those losses. According to the Brookings Institute’s William G. Gale, the TCJA is deeply flawed and problematic:

“Although it improved the tax code in some ways, TCJA will (a) have minimal impact on long-term growth; (b) increase disparities in after-tax income by giving the largest relative and absolute tax cuts to high-income households; (c) make most households worse off after taking into account plausible ways of financing the tax cut; (d) make the government’s troublesome long-term fiscal status even worse; (e) make the tax system more complex and more uncertain; (f) make it harder for policymakers to fight future recessions; (g) reduce health insurance coverage, raise health insurance prices, and (h) reduce charitable giving.”

Trump’s personal history with taxes is unclear, as he is the first president since Richard Nixon to refuse to release his tax returns while in office. Trump also refused to release full returns while a presidential candidate.

Despite claims that he will not cut entitlement programs like Social Security, Trump’s budget for 2021 includes “drastic cuts” to Social Security, Medicaid, and Medicare.

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What is Joe Biden’s tax plan

While former Vice-President Joe Biden does not have a specific tax plan, the nonpartisan Tax Policy Center (TPC) analyzed his proposals. Biden focuses on relief for middle-earners dealing with issues like caregiving, retirement, housing, and education, offering many “refundable” credits, which means taxpayers get money back. The plan has several new ideas, like refundable credits for first-time homebuyers and refundable credits for renters; tax credits for informal caregivers and expanded eligibility for 401(k)s for periods off the job market. He suggests exempting forgiven loans from taxable income while expanding the income-based repayment.

Biden would make more taxpayers eligible for health insurance premium tax credits under the ACA, lower the limit on coverage costs, and calculate coverage expenses based on more comprehensive plans.

Undoing portions of the TCJA, Biden restores tax rates for earners over $400,000, raises rates on earners between $250,000 and $400,000, and brings back the top individual rate of 39.6%. For people with incomes over $1 million, capital gains would be taxed as regular income.

Biden’s corporate policies focus on new and emerging technologies and environmental issues, while stimulating economic growth. He wants to raise the top corporate bracket to 28% and reinstitute a minimum tax. His plan aims to keep more money within the US, while encouraging industry in areas with heavy layoffs.

He spurs environmentalism with tax deductions for energy efficiency upgrades, gets rid of fossil fuel tax preferences, reinstates credits for solar power, and incentivizes low-carbon manufacturing. He also offers incentives to lower emissions.

Our detailed analysis of Joe Biden’s tax plan is available here.

What is Joe Biden’s record on tax reform?

Joe Biden’s history on tax reform is largely about what is possible. Though deemed a “deficit hawk” by some, the one-time supporter of a Balanced Budget Amendment and former long-serving senator seems to weigh reality as his baseline in effecting change. The change part may be surprising to some; as The Intelligencer put it, “Joe Biden’s Platform Is More Progressive Than You Think.

Reality has, in the past, included a willingness to modify some programs, like Social Security, but the real risk of their overall survival comes from Republicans and Trump himself. Biden addresses such concerns in his “Biden Plan for Older Americans,” which seeks to make Social Security solvent by putting a greater burden on higher earners, to ensure a minimum benefit, to give the biggest cut to the oldest Americans and to protect widows and widowers.

Further reading on Joe Biden’s tax reform record.

A side-by-side comparison of policies.

Though Trump has no tax plan for his 2020 presidential run, he signed the Republican-crafted TCJA. A comparison of this revision of the tax code and Joe Biden’s proposed tax plan is below.

Issue Biden Trump
Overall Tax Burden
  • Shifts upward
  • Wealthiest 20% gets 92.6% of the INCREASE in tax liability
  • Shifted downward
  • Wealthiest 20% gets 72% of all tax BENEFITS for US taxpayers
Projected revenue over 10 years
  • $4 trillion increase over a decade
Corporate tax rate
  • 28%
  • 21%
  • Additionally allows "bonus" depreciation and 100% expensing, meaning 100% of the cost of a new aircraft, for example can be deducted further lowering the effective rate
Alternative Minimum Tax
  • Yes
  • No
Individual
  • Slight increases for all brackets, but 92.6% of all tax increases apply to the top 20%
  • Raised standard deduction
  • Eliminated or limited most deductions
Education
  • Expanded income-based repayment
  • Forgiven loans not treated as taxable income
  • No major changes from previously existing education credits
Environment
  • Expanding benefits for energy-efficient upgrades
  • Using tax benefits to develop low-carbon manufacturing and lower emissions
  • No specific incentives to improve or reduce environmental impact
Eliminate fossil fuels preference
  • Yes
  • No
  • Provides incentives for fossil fuels, including drilling and development costs
Social Security
  • Earnings above $400,00 subject to Social Security
  • Capped at $132,900 of income
Retirement
  • Earned income credit for workers over 65
  • Benefits for purchase of long-term care insurance
  • Increase incentives for middle earners to contribute to 401(k)s
  • Allow caregivers to make contributions when not in job market
  • Expand access to 401(k)s
  • Allow hardship withdrawals for domestic violence/sexual assault
  • Small business tax credits
  • No significant changes
Healthcare
  • Expands eligibility for premium credits
  • Lowers overall cost
  • Bases coverage cost on more comprehensive insurance
  • Eliminated individual health insurance mandate penalty

The Rantt Rundown

As a candidate, Trump has not offered any tax plans. Biden does not have a specific “tax policy,” but TPC analyzed his plans to paint a tax picture, and it’s one of progressive yet realistic ideas. Under Trump, Republicans passed the TCJA, a sweeping tax reform act that mostly benefited wealthy individuals and corporations, while Biden seeks to reverse many of those gains. Instead, his plan focuses on common life issues like education, caregiving, and housing, on the environment, and on shifting the tax burden upward to those taxpayers who can best afford it. When it comes to Social Security, some have criticized Biden’s willingness to modify the program, but it is Trump and Republicans who seek to drastically cut entitlements. Instead, Biden hopes to strengthen Social Security with his Plan for Older Americans.

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Rantt 101 // 2020 / Donald Trump / Joe Biden / Taxes