Understand How a Trump or Biden Presidency Would Affect Your Financial Future
- Author: Jeffrey Simmons
- Posted: 2024-09-08
While there is no guarantee that each candidate's proposal would become law, it is important to understand their outcomes for student loans, Medicare, taxes, and Social Security for your personal financial planning.
Trump Tax Cuts
Trump put forth his signature legislature, the Tax Cuts and Jobs Act in 2017. The new law overhauled the tax code by increasing the standard and itemized deductions, among other items.
Trump believes in benevolent tax cuts. With such cuts, enterprises and businesses would spur innovation, hire more people, and expand the economy. GDP would have modest growth throughout the year. The tax cuts led to a booming economy with an unemployment rate of 3.5%.
Unfortunately, because of the pandemic, the economy has stalled, and economic growth is forthcoming. For 2020, GDP fell over 30% in the second quarter, but it remained steady in the third quarter. Many economists fear the second wave of lockdowns for the U.S.A. since Europe has already locked down their economy for the winter months.
Trump Tax Plan
At the onset of the Trump tax plan, every social strata would receive a tax cut for the next four years.
- Top 20%: $6,570
- Fourth Quintile: $1,640
- Third Quintile: $850
- Second Quintile: $370
- Bottom 20%: $80
On average, the bulk of the $259 billion in savings went to the Americans whose annual income exceeded $100,000. The Trump temporary tax cuts will expire in 2025. If Trump wins reelection, experts believe he will keep taxes low and steady. Do not expect to see increases in estate taxes or capital gains taxes. The Trump administration may try to make the tax cuts permanent.
Biden Tax Increases
The pandemic, along with Trump's tax cuts have led to large deficits. It was Trump's intention that with the large tax cuts, the economic growth would outpace deficit spending. Despite this, anticipate Biden to raise income taxes and capital gains taxes from the booming stock market.
Congressional members may see a need to decrease the national debt. Earners who make over $400,000 per year will see a modest increase in taxes. The rate on top earners is expected to be around 39.6%. Currently, the rate is 37%.
Most households would see an increase of 1.5% in taxes. According to the Bookings Tax Policy Center, households making over $167,000 per year, which happens to be the top 20% of households, would notice this benefit. These households' new tax rates would be effective in 2022.
On the other end of the spectrum, low-earning Americans would get some tax breaks. The child tax credit for children under the age of 17 would get a boost to $3,000. For children age six and under, their families would benefit from an extra $600 boost.
Biden would even make the child tax credits fully refundable. Presently, taxpayers can only get a maximum of $1,400 as a refund, even if they owe no taxes. The corporate tax rate would increase, and the capital gains tax will exceed 20%.
Biden Tax Plan
For the Biden tax plan, upper classes would have an increase in income taxes.
- Top 20%: -$14,700
- Fourth Quintile: $420
- Third Quintile: $620
- Second Quintile: $790
- Bottom 20%: $750
Student Loans
Biden wants to forgive a portion of student loans. The maximum amount that his administration would forgive would be $10,000. This is for taxpayers whose incomes are less that $125,000 per year.
Trump has no such proposals. Currently, student loans are on deferment, but students are responsible for their own personal debt.
Social Security
Trump wants to make the Social Security payroll tax holiday permanent. It is only effective until the end of 2020. Payroll taxes are presently deferred. With his reelection, he would forgive the deferment and make the payroll cut permanent.
For Biden, look for his administration to reverse Trump's payroll tax holiday and reinstate the payroll taxes. Most members of Congress agree that it is crucial to keep the Social Security system operative and solvent
