TaxWatch: What Bernie Sanders, Elizabeth Warren and the other Democratic presidential candidates want to do to your taxes
Taxes are at the heart of the Democratic presidential race.
As candidates focus on growing income inequality and propose large scale health and higher education plans to address the problem, more taxes — for corporations and the rich — are the way they want to underwrite their proposals.
For example, Sen. Bernie Sanders and Sen. Elizabeth Warren have proposed wealth taxes, an added levy on millionaires and billionaires, to pay for expanded health care and student loan cancellation.
Meanwhile, former Vice President Joe Biden wants to limit how much taxpayers can use deductions to reduce tax liability to raise revenue to address climate change, infrastructure, health care and higher education.
Sen. Amy Klobuchar wants to tax capital gains as ordinary income and raise the rate for the top income bracket to help fund paid family leave, free community college and other programs.
The competing tax proposals come three years after President Donald Trump overhauled the tax code to reduce income tax rates for individuals and businesses. One provision lowered the personal income tax rate for top earners to 37% from 39.6% and another provision reduced the corporate income tax rate to 21% from 35%. Trump is expected to reveal another round of tax cuts later this year.
Every Democratic presidential hopeful says Trump’s tax cuts went too far, and they are all vowing to raise taxes on the rich and corporations. Aside from that, there are differences in the candidates’ proposals and the extent of taxation they say they want.
Here’s how the plans stack up against each other:
Sen. Bernie Sanders of Vermont
Income Taxes: Sanders plan would maintain the lower six income brackets at their current rates and raise the 35% income bracket to 40%, according to the Tax Foundation, a right-leaning think tank focused on tax policy. (The current 35% rate applies to a married couple making between $408,201 and $612,350, and $204,101 to $510,300 for singles.)
Sanders would add three more brackets, which apply rates of 45% for households making between $500,000 and $2 million, 50% for households making between $2 million and $10 million and 52% for household making above $10 million, the Tax Foundation noted.
Sanders would also apply a 12.4% payroll tax on wages above $250,000, the Tax Foundation said.
On Thursday, Sanders announced a proposal to change the tax rules on deferred compensation for high-paid executives. Among other things, stock options would be factored into a person’s income tax obligation once their stock options vest, the Wall Street Journal reported. The revised stock option tax rules would reportedly count for employees earning above $130,000.
Wealth Tax: In addition to a 52% top rate, Sanders proposes a 1% tax on net wealth above $32 million, 2% on $50 million and up to 8% on wealth above $10 billion. The proposal is a tax on what Sanders calls “extreme wealth.”
Estate Taxes: The current federal estate tax of 40% applies to estates worth more than $11.58 million in 2020. Sanders seeks an estate tax rate that starts at 45% for estates worth $3.5 million. It ranges up to 77% for estates valued above $1 billion.
Sanders would also end the so-called “Step-Up in Basis,” a provision that restarts asset appreciation, for capital gain tax purposes, upon inheritance.
Corporate Taxes: Sanders would return to the Obama administration-era 35% income tax rate.
Capital Gains Tax: The IRS taxes the sale of an asset that’s grown in value over time, such as a stock. Taxpayers making at least $78,750, and filing single, are taxed at 15%. With some exceptions, single taxpayer earning above $434,550 face a 20% capital gains tax. Sanders’ capital gains tax rate would be the same as the income tax rate for households making over $250,000.
Financial Transactions Tax: Sanders would tax stock trades at .5% (50 basis points), bond trades at .1% (10 basis points) and derivatives transactions at .005% (5 basis points).
Former Vice President Joe Biden
Income Taxes: Biden is proposing to revert the top income tax rate back to 39.6% for earnings above $510,000. Biden would also limit itemized deductions to a reduction of 28% of tax liability. Biden would apply a 12.4% payroll tax on wages above $400,000.
Wealth Tax: None.
Estate Taxes: Biden would eliminate the step up in basis.
Corporate Taxes: Biden would bring the corporate income tax rate to 28%.
Capital gains: Biden would tax capital gains at the same rate as ordinary income for households making over $1 million — in other words, at 39.6%.
Financial Transactions Tax: None specifically proposed, but Biden has said he supports the concept.
Former South Bend, Ind. Mayor Pete Buttigieg
Income Taxes: Buttigieg is proposing to revert the top income tax rate back to 39.6%. He would broaden eligibility for the Earned Income Tax Credit, a long-standing tax credit for low-income working families. He would repeal the $10,000 State and Local Taxes deduction cap for households earning less than $400,000. He would also assess a 12.4% payroll tax on wages above $250,000.
Wealth Tax: None proposed.
Estate Taxes: Buttigieg would eliminate the step up in basis.
Corporate Taxes: Buttigieg would revert the corporate income tax rate back to 35%
Financial Transactions Tax: Buttigieg is proposing a 0.1% financial transactions tax on all securities trades.
Capital Gains Tax: Buttigieg would tax capital gains at the same rate as ordinary income for the top 1% of households — i.e. at 39.6%. As the consulting firm Andersen notes, Buttigieg would also implement “mark to market” taxation, where the top 1% of taxpayers would pay a yearly tax on the appreciation of their assets. Assets like stocks are now taxed only at the time of sale.
Senator Amy Klobuchar of Minnesota
Income Taxes: Klobuchar would bring the top income tax rate back to 39.6% and apply a 30% minimum rate on taxpayers with adjusted gross income above $1 million. She also wants to expand the Earned Income Tax Credit. She would boost the maximum credit by approximately 30% and widen eligibility.
Wealth Tax: None proposed.
Estate Taxes: Klobuchar says she will end “trust fund loopholes that allow the wealthy to avoid paying taxes on inherited wealth.”
Corporate Taxes: Klobuchar would increase the corporate income tax rate to 25%.
Capital Gains Tax: Klobuchar would tax capital gains at ordinary income tax rates for households making more than $400,000.
Financial Transactions Tax: None proposed.
Michael Bloomberg, businessman and former New York City Mayor
Income Taxes: Bloomberg would bring the top income tax rate back to 39.6%. He would also broaden eligibility for the Earned Income Tax Credit.
Wealth Tax: Bloomberg is proposing a 5% additional tax on household incomes above $5 million.
Estate Taxes: Bloomberg would eliminate the step up in basis.
Corporate Taxes: Bloomberg would increase the corporate income tax rate to 28%.
Capital Gains Tax: Bloomberg would tax capital gains at ordinary income tax rates for households making at least $1 million, which is 39.6%.
Financial Transactions Tax: Bloomberg is offering a phased-in tax that will eventually result in a 0.1% tax on all stock, bond and derivative trades. The tax would start at 0.02%.
Senator Elizabeth Warren of Massachusetts
Income Taxes: Warren would bring the top income tax rate back to 39.6%, and assess a 14.8% high income social security tax on the top bracket.
Wealth Tax: Warren’s wealth tax starts at 2% for income above $50 million, escalating to 6% for income above $1 billion.
Estate Taxes: Warren would eliminate the step up in basis.
Corporate Taxes: Warren would restore the corporate income tax rate to 35%.
Capital Gains Tax: Warren would tax capital gains at ordinary income rates for the richest 1% of households. The consulting firm Andersen noted that Warren would also implement “mark to market” taxation, where the top 1% of taxpayers would pay a yearly tax on the appreciation of their assets.
Financial Transactions Tax: Warren would implement a 0.1% tax on financial transactions.
Tom Steyer, businessman
Income Taxes: Steyer would send the top rate back to 39.6%, applying to individuals making above $418,000 and married couples making more than $470,000. Steyer would reduce tax rates by 10% for families making less than $250,000 and individuals making $200,000 and below. He would also broaden eligibility for the Earned Income Tax Credit.
Wealth Tax: Steyer proposes a wealth tax that starts at 1% for income above $32 million and caps at 2% for income above $1 billion.
Estate Taxes: Steyer supports raising the estate tax, a spokeswoman said.
Corporate Taxes: Steyer would bring the corporate income tax rate back to 35%.
Capital Gains Tax: Steyer would tax capital gains at ordinary income tax rates.
Financial Transactions Tax: Steyer supports a financial transactions tax, a spokeswoman said.
Rep. Tulsi Gabbard of Hawaii
Income Taxes: Gabbard has not proposed income tax changes, but she would propose an increase in payroll taxes to go towards Social Security, according to the Urban-Brookings Tax Policy Center, a left-leaning think tank focused on tax policies.
Wealth Tax: None proposed.
Estate Taxes: No proposed changes.
Corporate Taxes: Gabbard would increase the corporate income tax rate to 24.5%
Capital Gains Tax: No proposed changes.
Financial Transactions Tax: No proposed changes.