What would tax reform look like under a Hillary Clinton administration? This post will list some of the tax proposals found on her campaign website: www.hillaryclinton.com.
Mrs. Clinton’s tax policies revolve around the theme of fairness. Her plan would act to close loopholes and increase tax rates on the wealthiest of taxpayers. Here are some of the specific changes that would affect individuals:
- A “Fair Share Surcharge” of 4% would be imposed on taxpayers with incomes exceeding $5 million.
- The “Buffett Rule” would ensure that those making more than $ 1 million per year would pay at least an effective tax rate of 30%. This idea was established after billionaire Warren Buffett pointed out that his effective tax rate was lower than his secretary’s.
- The tax rules involving capital gains would be reworked. The required holding period for long term capital gain rates would increase from one year to six years. Taxpayers in the top rate brackets would see increases in the capital gain rate for holding periods less than six years.
- The maximum estate tax rate would rise to 45% and the exemption amount would be lowered to $ 3.5 million from the current $ 5.45 million.
- The value of itemized deductions would be capped at 28% for individuals in the higher tax brackets. This limitation would also apply to IRA deductions.
These proposals, especially the surcharge and “Buffett rule”, would apply to a relatively small number of people and may not do much in terms of raising tax revenue. Therefore, an important thing to watch is whether the definition of “the rich” becomes wider as more revenue is sought.
I will continue to watch these and other developments as the election year unfolds. In the interest of fairness, my next post will look at the tax ideas coming from the Libertarian candidate, Gary Johnson.
David K. Raye, CPA
*First published on August 12, 2016