Tax plans are always a hot topic during presidential elections, especially for High-Net-Worth Individuals (HNWIs) who can be significantly impacted by changes in policies.
As we examine the tax plans proposed by Vice President Kamala Harris and former President Donald Trump, it's crucial to understand how each plan might affect those with substantial financial assets.
Let’s dive into the details.
Overview of Harris’s Tax Plan
Income tax changes: Harris's plan includes raising the top individual income tax rate to 39.6% from the current 37%. This change targets those earning over $400,000 annually, aiming to increase the tax burden on the wealthiest Americans.
Capital gains tax: For those earning more than $1 million annually, Harris proposes taxing capital gains at the same rate as ordinary income, which would be 39.6%, up from the current 20%.
Corporate tax changes: Harris plans to increase the corporate tax rate from 21% to 28%, aiming to ensure that corporations pay their fair share.
Overview of Trump’s Tax Plan
Income tax changes: Trump's tax plan includes maintaining the current top individual income tax rate at 37%, with a focus on keeping taxes low across the board.
Corporate tax changes: Trump's tax plan aims to maintain the corporate tax rate at 21%, with the potential for further reductions to stimulate business growth.
Income Tax Changes
Harris’s approach to income tax: Harris aims to increase the tax rate for high earners, reinstating the top rate of 39.6% for those earning over $400,000.
Trump's approach to income tax: Trump's approach focuses on maintaining lower tax rates, keeping the top rate at 37%.
Capital Gains Tax
Harris’s capital gains tax proposal: Harris proposes taxing capital gains at the same rate as ordinary income for those earning over $1 million, significantly increasing the rate to 39.6%.
Trump's capital gains tax policy: Trump's plan includes reducing the long-term capital gains tax rate, potentially down to 15%.
Corporate Tax Changes
Harris’s corporate tax plan: Harris plans to raise the corporate tax rate to 28%, aiming to increase government revenue from businesses.
Trump's corporate tax plan: Trump proposes to lower the corporate income tax rate from 21% to 20% to promote business growth.
Harris’s proposals for deductions and credits: Harris plans to limit itemized deductions for high earners and increase tax credits for middle and lower-income households.
International tax rules define which countries tax the profits of a multinational business. Generally, the purpose is to ensure that the income of companies is taxed once rather than multiple times by multiple jurisdictions.
Harris’s international tax approach: Harris proposes a global minimum tax to prevent profit shifting and tax avoidance by multinational corporations.
Trump's international tax approach: Trump’s plan focuses on maintaining low taxes to attract businesses back to the U.S., without significant changes to international tax policies.
Impact on High-Net-Worth Individuals
Harris’s plan: HNWIs would likely see higher taxes on income, investments, and estates under Harris’s proposals.
Trump’s plan: Offers lower taxes across the board, potentially benefiting HNWIs through reduced rates and expanded deductions.
Long-Term Economic Implications
Harris’s long-term vision: Aims to increase government revenue for funding social programs and infrastructure, with the goal of reducing income inequality.
Trump’s long-term vision: Prioritizes economic growth through lower taxes and deregulation, aiming to stimulate business investment and job creation.
Criticisms and Support
Criticisms of Harris’s plan: Some argue that higher taxes on the wealthy could discourage investment and economic growth.
Support for Harris’s plan: Advocates believe it would help reduce income inequality and fund important social initiatives.
Criticisms of Trump’s plan: Some argue that his tax cuts disproportionately benefit the wealthy and could increase the federal deficit.
Support for Trump’s plan: Supporters argue that lower taxes encourage economic growth and investment, benefiting the economy overall.
Industry Opinions
Financial industry leaders have expressed a range of opinions on the tax plans proposed by Vice President Harris and former President Trump. Here are some insights from various individuals in the financial landscape:
About Harris:
Steven Rosenthal, Senior Fellow at the Urban-Brookings Tax Policy Center:“Harris's plan to increase the top individual income tax rate to 39.6% would significantly impact high earners, but it also addresses the broader goal of reducing income inequality by ensuring the wealthiest pay their fair share." (Urban-Brookings Tax Policy Center Report)
(Opinion) Megan Greene, Global Chief Economist at Kroll:"By aligning capital gains taxes with ordinary income rates, Harris's proposal could discourage some high-net-worth individuals from selling investments, but it would also generate substantial revenue to fund social programs." (CNBC Interview)
Howard Gleckman, Senior Contributor at Forbes and Tax Policy Expert: "Harris's plan to implement a global minimum tax is a strong step toward preventing tax avoidance by multinational corporations, but it will require careful coordination with other countries to be effective." (Forbes Analysis)
Mark Mazur, Former Assistant Secretary for Tax Policy at the U.S. Treasury: "While Harris's corporate tax hike aims to close loopholes and ensure fairness, there's concern that it could reduce U.S. competitiveness in attracting businesses unless paired with broader international tax reforms." (Bloomberg Tax)
About Trump:
Andrew Poulos, Tax Expert: "Trump’s proposed extension of the 2017 tax cuts may lead to a major overhaul, while Harris’s plans look very ambitious and unrealistic. The IRS would need to update its systems that are currently outdated." (Nasdaq)
Center for American Progress Analysis: "Extending the Trump tax cuts would cost $3.2 trillion over 10 years in 2024 dollars and escalate to $10.3 trillion over 30 years. By 2054, this could raise the debt-to-GDP ratio significantly." (Nasdaq)
Tax Foundation Analysis: "Replacing the individual income tax with tariffs is completely unrealistic. A universal baseline tariff and specific tariffs on imports from China proposed by Trump would not raise sufficient revenue to replace individual income taxes and would significantly increase costs for American consumers and businesses." (Tax Foundation)
(Opinion) Daisy Maxi, Wall Street Journal Investments Journalist: “President Donald Trump’s tax proposal appears to be a big win for high earners, but a lot depends on individuals’ specific situations and many crucial details are absent. The plan, which the Trump administration unveiled last week, would lower taxes for many Americans and preserve many of the tax-code provisions that benefit wealthy and high-income individuals.” (WSJ)
(Opinion) Grover Norquist, President of Americans for Tax Reform:President Trump’s tax-free tip plan is a stroke of genius that cuts straight to the heart of the tax issue, making it clear that Republicans are the party of low taxes for everyone.(Fox News)
Final Thoughts
Evaluating the tax plans of Harris and Trump for HNWIs ultimately depends on individual priorities and values. Harris’s plan focuses on increasing taxes to fund social programs and reduce inequality, while Trump’s plan emphasizes lower taxes and economic growth.
Regardless of which plan takes effect, it’s essential to stay informed about how tax changes may impact your financial situation. Understanding these changes can help guide your approach to managing finances in the context of evolving policies.
