It is election season although this is an off year for presidential and congressional elections. As you are aware, however, the 2020 presidential election campaign season is well underway. It seems like there is less and less break time between presidential elections these days. To me, it doesn’t seem right that we start discussing the next presidential election nearly two years before it is held. Politics in general, and particularly presidential politics, can be a wild and crazy affair!
With the presidential election every four years, we typically get to hear the tax law proposals of each candidate and compare them side by side. I wanted to briefly touch on certain aspects of the proposals from the top Democratic presidential candidates today in comparison to our current tax law.
Most of the leading Democratic candidates are promising to pay for their tax policy changes with new taxes on the wealthy, although most have not yet provided details of their tax policy ideas. Democratic candidates have focused on taxing the wealthy as a key revenue source to fund ambitious ideas such as universal childcare, free college education and government-run health care. The cost of government-run health care is estimated to be around $30 trillion by itself.
Each of the candidates have talked about taxing capital gains income at the same rates as ordinary income such as wages. Ironically, none of the candidates had substantial capital gains tax liability in 2018. Most of the candidates received a tax break last year from the 2018 tax law that was passed. Kamala Harris is the only leading candidate whose tax liability rose because of the new tax law. The main reason was the new state and local tax (SALT) federal deduction rule changes. She paid a total of roughly $225,000 in state and local taxes but was only able to deduct $10,000 of that under the new tax law. The SALT tax limitations in the new tax law have been the cause of much debate since its passage since it disproportionately affects those who live in high-tax states such as California, New York, etc.
Joe Biden wants to keep the Affordable Care Act (Obamacare) and improve upon it rather than espouse a Medicare-for-all health system. Kamala Harris, Bernie Sanders and Elizabeth Warren favor a Medicare-for-all plan.
There is just over a year until the 2020 general election and it will be interesting to see who emerges to represent the Democratic party in opposition to President Trump. Get your popcorn and other treats ready as this process could be very interesting!
We are in the midst of 2019 tax projection and planning season now. If you have not yet scheduled your appointment to meet with my business partner, Andrew Hales, or me, please contact us to schedule.