Podcast: Play in new window | Download
I want to talk about some of the ways either a Clinton Presidency or a Trump Presidency could affect your finances—with a little bit of my opinion thrown in.
Let’s begin with Hillary.
How A Clinton Presidency Could Affect Your Finances
Although she’s been fairly quiet since her official nomination, Hillary Clinton has consistently presented a platform of changes focused—as she says—on American families. She has proposed four key programs that support her campaign’s Families First theme, starting with free preschool for every 4-year-old in the U.S. as well as paid family leave for new parents. For students, she’s proposed debt-free college options for state universities and community colleges. Finally, for seniors, she’s mentioned an expansion of certain Social Security benefits.
In her first 100 days, Clinton plans to increase infrastructure spending, essentially earmarking $275 billion to improve, repair, and maintain roads and bridges across the nation. A number of economists feel that the jobs created by these projects could boost the overall economy and growth rate, but we can’t ignore the hefty price tag they bring, which will squeeze some families harder than others. Who will get squeezed and how hard? Well, Clinton intends to raise the tax rate on those who make $1 million or more, ensuring that this group pays a minimum rate of 30 percent. Those who earn more than $5 million will be subject to an additional surcharge of 4 percent. In addition, she plans to cap itemized deductions at 28 percent and to reduce the threshold for estate taxes to $3.5 million down from the current 5.5 million, while imposing a 50% rate for estates worth over $10 million per person, 55% for estates over $50 million, and 65% for estates exceeding $500 million. Lastly, she has mentioned increasing the wage ceiling for Social Security payroll taxes, which is currently at $118,000.
My commentary: This is, essentially, a model for the redistribution of wealth, something that benefits one end of the economic spectrum far more than the other. With the expansion of entitlement programs, benefits focused on middle-and-lower-income households, and the infrastructure spending (which will all be funded by higher-earning households), a Clinton presidency seems focused on taking from the wealthy in order to benefit the middle class and the poor. I think she would agree with my assessment.
How A Trump Presidency Could Affect Your Finances
In spite of the many conflicting statements Donald Trump has made on a variety of topics, there is one subject he’s been clear on. His goal as president would be to put America First by helping ensure that we come out ahead in trade deals and keeping more companies operating on home soil. Two ways he plans to do that are by taxing goods coming in from Mexico and China and by reducing corporate taxes to 15 percent, a measure that will make corporations think twice about moving overseas.
While these plans sound great, we should remember that for every action there could be an equal and opposite reaction. It’s possible that the tariffs could work against us by increasing prices to a point that consumers won’t be able to afford. It may also push manufacturing to other parts of Asia rather than bringing it back home. Looking back at history as an example, it’s worth noting that one of the reasons behind the Great Depression was a rise in tariffs and protectionism. Reagan, too, had mixed results imposing tariffs on the Japanese in the 1980s.
It’s not all business tax and tariffs for Trump, however. Families who pay for childcare and eldercare may enjoy larger personal tax deductions under a Trump presidency, although this change won’t really help the more than 45 percent of Americans who pay no federal income taxes. Social Security and Medicare recipients are unlikely to suffer a reduction in benefits, but Trump has not rejected the idea of some entitlement cuts. Trump intends to do away with the estate tax and, in addition, has further mentioned lowering capital gains taxes, yet another move that could stimulate the economy and create jobs.
Of course, getting back to consequences, Trump’s tax reduction plans will have no new funding to support them, so even if his plans boost the economy, conservative think tanks still put the deficit between 4.5 and 6 trillion. I’m not sure that’s really putting America first.
If this all sounds a bit murky, bear in mind that promises made in the heat of a campaign are basically hypothetical and are pitches tuned to the voter’s ear. Not only can candidates change their direction after taking office, they must also find a way to get their plans passed by Congress, an often insurmountable hurdle. So don’t make your voting decision based on particular promises.
Only look at the trend they represent and the ability of the candidate to lead a large and unruly nation into the future.
