Trump vs. Biden: An Overview of 2020 Tax Platforms

Presumptive Republican Nominee: Donald Trump

President Donald Trump’s 2020 tax plan seeks to make permanent the individual, estate, and passthrough rules established by the 2017 Tax Cuts and Jobs Act* (currently set to expire in 2025). Listed below are several noteworthy aspects of the proposal:

Provisions Relevant to Individuals

  • Reduce the maximum capital gains tax rate to 15% for all tax brackets
  • Consideration of a 10% tax cut on the middle class
  • Implementation of a defined contribution system for federal employees in “term” positions (positions with term limits of 1-4 years)
  • A repeal of the residential energy efficient property credit
  • An option for Medicare beneficiaries with high deductible plans to make tax-deductible contributions to health savings accounts or medical savings accounts
  • Require a valid Social Security Number to claim certain tax credits

Provisions Relevant to Businesses

  • A repeal of accelerated depreciation for renewable energy property

IRS Reform

  • $12 billion in base funding for the IRS to “modernize the taxpayer experience and ensure that the IRS can fulfill its core tax filing season responsibilities.”
  • $353 million to be used for tax compliance and enforcement.
  • Make available $5 billion in annual income credits for individuals and corporate donations to state-identified nonprofit education scholarship-granting organizations.
  • Increased oversight of paid tax return preparers

Worth noting: While this tax proposal sets forth goals for Trump’s second term, should he be elected, it is unlikely that the Democrat-controlled House of Representatives would pass these policies in their proposed form. *For specifics on the 2017 Tax Cuts and Jobs Act, please contact your ATKG advisor.

Trump Biden
Presumptive Democratic Nominee: Joe Biden

Former Vice President Joe Biden’s 2020 tax plan is significantly more extensive. The candidate’s biggest promise is a tax increase for corporations and high-income individuals. It also adopts several credits related to renewable energy for both individuals and businesses, expands the Earned Income Tax Credit, and eliminates the stepped-up basis rule for inherited capital assets. Below are several other key components of Biden’s tax plan:

Provisions Relevant to Individuals

  • All wages over $400,000 will be subject to the 12.4% Social Security payroll tax.
  • Tax capital gains and dividends as ordinary income at 39.6% for taxpayers with income over $1 million
  • Increase the highest tax bracket to 39.6% for taxpayers with income over $400,000
  • Limit itemized deductions to 28% for taxpayers with income over $400,000 (There has been some discussion of rolling back TCJA limitations on certain itemized deductions for taxpayers with income under $400,000)
  • Phase-out on the qualified business deduction for taxpayers with income over $400,000
  • Expand access to 401(k) plans
  • Increase the Child and Dependent Care Credit to $8,000 per child (max $16,000), make the credit refundable, and increase the maximum reimbursement rate from 35% to 50%
  • Remove the $2,500 reimbursement threshold, make fully refundable, and increase the Child Tax Credit from $2,000 to $3,000 per child under the age of 17 in addition to a $600 bonus credit for each child under the age of 6  for 2021 and “as long as economic conditions require.”
  • Allow low-wage workers over 65 to claim the earned income credit.
  • Implement a new refundable tax credit (up to $15,000) for first-time homebuyers
  • Create a $5,000 tax credit for using informal caregivers, including family members
  • Introduce an income-driven student loan repayment plan offering tax-free forgiveness after 20-25 years of participation

Wealth Transfer

  • Reduce the estate tax exemption by 50% from its current level of $11.58 million of estate assets
  • Repeal the present law which allows a step-up in basis to fair market value at date of death for inherited assets

Provisions Relevant to Businesses

  • Increase the corporate income tax to 28% from 21%
  • Impose a 15% minimum tax on companies’ “book” profits with annual income of $100 million+
  • Introduce an additional 10% offshoring penalty surtax on the production profits of U.S. companies overseas with goods available for sale on U.S. soil
  • Double the tax rate on Global Intangible Low Tax Income (GILTI) earned by foreign subsidiaries of US firms to 21% from 10.5%
  • Limit use of like-kind exchanges by real estate investors
  • Increase scrutiny of businesses classifying individuals as independent contractors
  • Preclude certain businesses from eligibility to claim the qualified business income deduction, particularly in the real estate investment arena
  • Offer a 10% “Made in America” tax credit to companies that revitalize or expand facilities and create jobs for American workers
  • Provide tax credits to small businesses that offer workplace retirement savings plans
  • Expand several renewable-energy-related tax credits
  • Restores the Energy Investment Tax Credit and the Electric Vehicle Tax Credit
  • End subsidies for fossil fuels such as oil & gas depletion and drilling deductions

Worth noting: Should the Republicans maintain control of the Senate post-election; it is likely that the Biden-Harris proposed legislation in its current form will face opposition. 

Have Questions About What This All Means for You?

Our team of professionals can help you understand how this proposed legislation impacts you and your business. Contact your ATKG representative or email us at info@atkgcpa.com.

Brittany Hawkins is a Tax Manager for ATKG. She brings a wealth of expertise to the firm having worked for a Big Four and two Texas-based accounting firms. Brittany joined ATKG in 2019 and has experience working with clients needing both foreign and domestic tax law expertise. She is a Certified Public Account and a frequent presenter to professional organizations where she discusses trending topics in accounting and tax. Brittany received her Bachelor of Business Administration and Master of Science in Accountancy from Texas Tech University, where she achieved being recognized on the President’s List all through undergrad.

For further information on this topic or other tax questions, please contact Brittany Hawkins or a member of our Tax practice at 210.733.6611 or bhawkins@atkgcpa.com.