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Trump Or Harris: Who’s Better For Taxes?
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After that debate last night 🙄 we figured it makes sense to continue with the political theme for second day in a row. On Tuesday, The Juice discussed some of the wealthy folks among us who are supporting Kamala Harris, after doing likewise for Donald Trump a few weeks ago. Sandwiched between, we detailed the proposal to tax unrealized capital gains, which, if it sees the light of day, will only impact the richest of the rich. In a minute, we keep with that focus on what the election might mean — if anything — for your money. While history shows that elections and presidents have effectively no impact on the upward trajectory of the stock market, income tax plans definitely can and sometimes do. But first — real quick (for now) — Nvidia (NVDA). At the end of August, we suggested using any weakness to buy Nvidia stock: Therefore, in our view, you set automatic weekly, bi-weekly or monthly investments into NVDA no matter the price. You set a limit order to buy on weakness. And, if you have extra cash and don’t have anything else pressing on your watchlist, buy more. Just as long as you’re also diversifying in other stocks (think other tech names, dividend payers and broad-market ETFs). Because the only thing Nvidia is guilty of — if anything —is not living up to sort of absurd expectations. In tomorrow’s Juice, we update that stance alongside a real and exciting opportunity in what we think is the latest iteration of the stock’s market — more or less — bullish run. So forward The Juice to a friend as we blend useful and relatable personal finance and investing with straightforward economic and political content five days a week, 52 weeks a year. For free. We’re ready to crush the end of 2024 and power into 2025 better than ever on stocks, housing, cost of living and more, not to mention the best educational content (for example) you’re going to find online. Upward and onward to taxes. To start, here are what the Trump tax cuts did to average tax rates between 2017 and 2018:
If these tax cuts expire — and they are set to do just that at the end of 2025 — then taxes will increase. Tax brackets would go from the current 10%, 12%, 22%, 24%, 32%, 35% and 37% to the old 10%, 15%, 25%, 28%, 33%, 35% and 39.6% structure with difference income thresholds for single and married filing jointly taxpayers. But, let’s put this in perspective. A middle income taxpayer will have saved about $900 by 2025, whereas somebody in the top 1% will have saved, on average, roughly $61,000 under the Trump tax cuts, according to analysis from Urban-Brookings Tax Policy Center. If the Trump tax cuts expire, the Tax Foundation estimates that the average tax bill would increase by between just under $2,000 and just over $4,000 per filer, depending on which state you live in. They break things down even further by looking at “current policy across congressional districts.” The just right-of-center Tax Foundation says that “For example, the congressional district covering the San Francisco area would see an average tax hike of $16,127 per taxpayer, the highest in the U.S.” Nationally, the group anticipates an average increase of $2,853 per taxpayer nationwide. In sum, the Tax Foundation claims about 62% of taxpayers would see their taxes go up. Here again, if Congress allows the Trump tax cuts to expire. Of course, Trump would like to extend these tax cuts and, to help make up for it, increase tariffs on foreign goods, which would, theoretically, bring more money into government coffers. Trump has also said he would exempt tips from taxes, which is also something Harris has promoted. Trump has also floated the idea of exempting Social Security payments from taxation. As for Harris, despite the rhetoric and infighting, her and Trump pretty much agree on taxes for a majority of Americans. Stress a majority and pretty much. For most intents and purposes, Harris would like to keep things as they are for taxpayers who earn less than $400,000 a year. So, we’re talking about 98% of taxpayers. But this is where the agreement between the two ends. As is often the case on taxes in America, it comes down to what you do (or don’t do) for lower-income Americans and how hard you go after the highest earners. Harris would like to make the child tax credit refundable, which means you would receive this credit (if you qualify) as a refund even if you have no tax liability. Republicans tend to oppose refundable credits, which tend to benefit lower-income taxpayers who often have no taxes due. Harris is also promoting a $6,000 tax credit for qualifying households with a newborn and a tax credit of up to $25,000 for some first-time homebuyers. To help pay for the credits and help offset the extension of the tax cuts for people earning less than $400,000, Harris proposes a minimum 25% tax on people who have more than $100 million in wealth (this could include the aforementioned tax on unrealized capital gains). For households with yearly income of $1,000,000 or more, Harris proposes charging a 28% tax on long-term, realized capital gains. This is up from the current rate of 20% on high earners.
The Bottom Line: In a nutshell, if Trump wins, his tax cuts get extended across the board. If Harris wins, they remain intact for people earning less than $400,000, but would go up for high earners. This, along with a proposal to increase the corporate tax rate, would help fund the credits, including the refundable child tax credit, which, again, would benefit lower-income Americans. All of this said, if you’re middle or even upper middle class, you shouldn’t expect your tax bill to change all that much no matter who gets in office. As if often the case, it comes down to your appetite for taxing the rich, the otherwise wealthy and corporate America. |
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