How a Trump or Clinton Presidency Could Affect Your Wallet
When running for president, candidates make lofty promises about the things they'll accomplish if elected. Our system of government intentionally makes it difficult for presidents to accomplish much on their own, but every president can directly affect the day-to-day finances of ordinary Americans. Barring unforeseen circumstances, either Donald Trump or Hillary Clinton will be the next president. Here are some of the presidential ambitions that could have a real impact on your finances in a Trump or Clinton presidency.
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Americans pay federal income tax through a progressive system that groups taxpayers into income-based brackets. Those who earn more pay a higher percentage. Currently there are seven tax brackets ranging from 10 percent to 39.6 percent. Taxpayers in all but two brackets pay at least 25 percent of their income in federal taxes. If elected president, Trump vows to simplify the code to just three brackets (for married, joint filers), which would lower the tax burden for most citizens. Those who make less than $75,000 would pay 12 percent in taxes. Those who earn between $75,000 and $225,000 would pay 25 percent. Households with income greater than $225,000 would pay 33 percent.
Clinton's tax plan wouldn't have a major impact on roughly 95 percent of taxpayers. The top 5 percent, and especially the top 1 percent, however, would see their tax burden increase. Clinton proposes a 4 percent surcharge on income over $5 million. She would also institute the so-called Buffett rule (named for billionaire investor and tax-reform advocate Warren Buffett), which would force individuals earning $1 million or more to pay an effective tax rate of 30 percent. She also hopes to close loopholes that allow the wealthy to shelter millions in tax-free retirement accounts, stash money overseas, or avoid taxes in "private" tax systems.
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Trump vows to rewrite the tax code so that parents can deduct the cost of child care for up to four children (as well as elderly dependents) from federal income taxes. He also proposes allowing parents to open tax-free, IRA-style savings accounts dedicated to child care. Not only does the businessman propose six weeks of paid leave for new mothers, but he also wants to give a child-care rebate to low-income taxpayers, along with a $500 matching contribution to their savings accounts. Currently, residents of all but 13 states pay more than 10 percent of income on child care expenses. In states where care is costliest, some single parents and people living near the poverty line dedicate more than 75 percent of their income to child care.
Like Trump, Clinton would require employers to grant paid leave in the event of childbirth. Her plan, however, would allow 12 weeks as opposed to Trump's six weeks. She would also guarantee employees at least two-thirds of their regular salary. Trump's plan guarantees new mothers only what they would have been paid in unemployment benefits had they been laid off. Perhaps the most striking difference, however, is that Clinton's plan also provides new fathers with paid leave. Currently, the United States is the only developed country in the world that doesn't guarantee any paid parental leave.
Trump has been inconsistent on whether or not he favors an increase in interest rates, which are near historic lows. The Federal Reserve sets federal funds rate targets and controls monetary policy. The Fed's current chair, Janet Yellen, has repeatedly fallen in and out of favor with Trump over the course of the campaign. As president, he could replace her in 2018 with someone who shares his currentviews on interest rates. Consumers are directly affected when the Fed raises interest rates. It becomes more expensive to borrow money for things like mortgages or auto loans but also leads to better earnings from financial vehicles like bonds and savings accounts.
Clinton promises that, if elected, she'll make all community colleges tuition-free. She vows that right away, students from families earning $85,000 or less will be able to attend in-state, public, four-year institutions without paying tuition. By 2021, that offer will extend to families earning up to $125,000. She also vows to allow 25 million student debt holders to refinance their loans at current interest rates and expand income-based repayment plans to ensure that borrowers never pay more than 10 percent of their income. She also promises to cut interest rates so the government never profits from student loans. Currently, the average cost of an in-state public college is $9,410 a year, and the average student graduates with $30,000 in loans.
Related: Is It Cheaper for Americans to Go to College Overseas?
Americans who are fortunate enough to receive a large inheritance after the death of a loved one must pay taxes on it. Those who oppose the tax refer to it as a "death tax." People who believe wealthy heirs should pay a tax call it an estate tax. Either way, Trump says it should go. He would, however, make an exemption for capital gains held until death and valued at more than $10 million. He would also close a common loophole that allows the estate to go to charities set up by the heirs. In most cases, however, if your rich uncle dies and he loved you the best, you'd get to keep your whole inheritance under President Trump.
Currently, estates valued at $5.45 million or less are exempt from the estate tax. Estates worth more are taxed at a flat rate of 40 percent. Clinton wants to lower the exemption to $3.5 million from $5.45 million and eliminate the flat 40 percent rate. At $10 million the tax rate would hit 50 percent. At $50 million it would climb to 55 percent, and for estates worth $500 million or more, the tax would climb to 65 percent.
Nearly 6 in 10 Americans are paid by the hour, and 870,000 of those hourly workers earn minimum wage, which is currently $7.25 an hour. Any increase would give those people an immediate pay raise. Trump has broken with the GOP by saying he supports increasing the minimum wage to $10 an hour. That would give a raise to 15 million Americans who currently earn less than $10 an hour. Clinton, on the other hand, would raise the wage floor to $15 an hour, which would increase the pay of nearly half the American workforce.
The area where the two candidates are likely to have the least agreement might have the greatest impact on your wallet: health care. The Obama administration's signature piece of legislation was the Affordable Care Act, commonly known as Obamacare. Trump wants Congress to completely repeal the ACA and replace it with health savings accounts. Clinton vows not only to keep Obamacare but to expand it, even creating a public option. It's difficult to quantify how much money an individual would lose or gain either way, due to the many variables involved in both scenarios. Both sides claim disaster if the other succeeds and offer a mountain of data, official reports, and expert reviews to make their cases. One thing is almost certain, however: Your taxes, premiums, and overall health-care costs will change, whether the law is repealed or expanded.
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