Crystal Gazing: A Look at the Presidential Candidates’ Major Income Tax Proposals

With the primaries and conventions behind us, Joe Biden and Donald Trump are now the official presidential nominees. Since the November 3rd elections are looming, we expect increased focus on the major policy differences between the two candidates that may very well impact executive compensation planning.

While Biden has no formal tax plan with all federal proposals in one document, his campaign website contains over 40 plans on a wide range of policy topics including climate change, infrastructure, health care, domestic manufacturing, rebuilding US supply chains, housing, racial inequalities, child care, elder care, and the opioid crisis. Many of these plans have tax components that are designed to further policy goals or offset the costs of the plans.

Fewer details have been released on President Trump’s tax proposals. Trump’s 2021 budget proposal, released in February 2020, before the pandemic was at full tilt, provides some expectations. Also helpful is the recently released Second Term Agenda outlining the key points of Trump’s policy vision. Within this agenda are a few policy items such as expanding existing tax breaks, creating credits for specific industries and activities, and unspecified tax cuts for individuals. The president has also expressed support for other policy changes related to capital gains and middle-class tax cuts. So far, none of the campaign documents have included a plan to extend the expiring provisions under the 2017 Tax Cuts and Jobs Act (TCJA), although that topic takes center stage in the 2021 budget proposal. While the Trump proposals are light on details, the specifics are promised to be shared in the coming weeks.

Of course, proposals from either a Trump or Biden administration will be influenced by a variety of unpredictable forces before actually becoming laws—such as what might happen in the Congressional races, the status of the economic recovery next year, and the severity of the COVID-19 virus at that time. Candidate Biden has an aggressive agenda, proposed to be financed, in large part, by raising tax revenue. Should Democrats win the presidency, maintain control of the House of Representatives, and secure a majority in the Senate, we may see substantive changes. On the other hand, Biden’s agenda is likely to be more moderate if there is a Democratic presidential victory with Republicans maintaining control of the Senate.

Despite the unpredictability of the elections, the economy, and COVID-19, there seems to be more than an outside chance that changes are on the horizon and, as a result, making sense of where next year’s tax legislation might be heading is in order. Below are charts summarizing some of the major tax policies that have been put forward to date, formally or informally, by the Presidential candidates.