Do you wonder what impact the 2020 presidential election could have on your taxes, both now and in the future?
Politics and taxes have a complicated relationship. You cannot always predict how the former will impact your taxes in the coming year, but you can take a look at where each party stands on taxes as a whole and the likely impact their policies will have on your future tax burden. This guide will give you an overview of how elections impact taxes, and where each presidential candidate’s platform differs.
Note: Contact an experienced tax professional if you have specific concerns about how each candidate’s measures could impact your income tax burden after the election.
How Elections Impact Taxes
To understand how elections can impact taxes, you must carefully consider each party’s stated plans for taxation and how their other plans and policies have the potential to impact overall taxes. A party that supports public programs will likely need to raise taxes in order to cover those problems, for example. A party that supports bailing out big businesses may need to increase taxes even more to create that necessary support.
Make sure you have a solid understanding of how each party’s policies and plans can impact your tax burden — rather than just looking at the tax policies directly — both when you’re planning how to vote for the next President or for state and local elections.
Proposed Tax Changes for 2020: A Brief Overview
Each party has its own stance as it prepares for the 2020 elections. This year, tax policies have the potential to substantially impact the election as many people worry about the economic impact of COVID-19.
Joe Biden’s Tax Plan
Former Vice President Joe Biden’s tax plan relies on several factors that may increase the tax burden for wealthier Americans. His tax proposal includes:
- Increasing the maximum tax burden to 39% for those in the wealthiest bracket
- Decreasing itemized deductions for wealthy Americans
- Creating tax breaks for the middle class, including increasing the child tax credit and offering student loan forgiveness
- Providing increased stimulus money for Americans suffering under the effect of COVID-19
- Providing more readily accessible healthcare, including improving on the Obamacare platform
- Offering more affordable housing
- Providing tax breaks for elderly and disabled individuals
- Raising the corporate tax rate to 28% (It was decreased to 21% from 35% by the 2021 tax reforms.)
Overall, democratic candidate Biden’s tax plans seem to focus on increasing taxes on the wealthy while decreasing the tax burden faced by working-class Americans. This does rely on government funding for several initiatives and programs, but could provide support in the immediate aftermath of the COVID-19 pandemic as well as when life goes back to normal.
President Donald Trump’s Tax Plan
President Trump has also released an overview of his tax plans if he gets reelected in the 2020 presidential election. In addition to cutting payroll funding for Social Security and Medicare — which could have catastrophic impacts on the future of those programs — his tax plan includes:
- Payroll tax cuts, which come in the aftermath of a payroll tax deferment intended to help relieve financial stress during the pandemic
- Tax breaks for the middle class’s income tax rates
- Further stimulus payments for those impacted by COVID-19 potentially equal to the amount initially offered in the stimulus package
- Reduced capital gains taxes
- Reduced taxes on Opportunity Zone investments (a strategy that primarily benefits the wealthy upper class)
- Travel tax credits that could offer incentives for Americans who travel throughout the coming year and could help get the tourism industry moving after COVID-19
- Increased school choice options that would allow parents to have more flexibility and choice in where their children attend school. This program would provide scholarships for children to attend the K-12 school of their parents’ choice, but might require taxes and funding to implement.
- Business tax breaks. These have not yet been specified, but could offer support for businesses that choose to do their manufacturing in America or extending specific tax breaks to big businesses. Trump may also institute credits for businesses that bring back jobs from China, which could help stimulate American employment and the American economy’s tax code.
President Trump’s tax plans focus on decreasing the burden faced by both small and large business owners. They could also decrease the tax burden faced by the wealthy and middle classes, as well as provide much-needed stimulus money for private individuals and big businesses. President Trump also focuses heavily on benefitting the American people through awareness of business owners’ needs and encouraging those owners to bring as much of their business as possible back to America.
When Do Tax Changes Take Effect?
Tax changes take time to implement. As a result, most tax changes will likely not take place in 2020. Both candidates’ platforms this year include policies that focus on reducing the economic impact of COVID-19 — including both the impact to private individuals and on businesses — but those policies will probably not be put into place until 2021 or later. The changes associated with each candidate’s platform could have immense impacts on the American people, and you may need to prepare for the potential impact to your taxes regardless of who wins the election.
Need Tax Help?
Whether you’re concerned with your 2020 taxes or worried what your taxes will look like in 2021, the team at Silver Tax Group can help. Contact us today to learn how to prepare for new tax laws in 2020 and beyond.