Trump v Biden: Predictions for how the election will shape the future of US tax
US voters head to the polls in two weeks to decide whether President Donald Trump will secure another four years in power or Joe Biden is handed the keys to the White House.
While we know much about where Trump and Biden stand on issues such as Covid-19, climate change and foreign policy, there has been less attention placed on tax in the run-up to this election.
That’s why I’ve decided to take a closer look at the economic principles of both men, as well as the evidence of their time in power, to predict how US businesses, citizens and people around the world will be affected in tax terms by the result of the election.
With the economic recovery from Covid-19 set to be the dominant theme of the next four years, using tax to drive state revenue, stimulate consumer spending and ultimately deliver growth is undoubtedly a crucial issue for the next president.
But when it comes to how to do it, you won’t be surprised to find Biden’s views on tax are the antithesis of what the incumbent president is proposing.
In the red corner… Donald Trump
Back in 2016, tax was a much hotter topic in the weeks before the election. Donald Trump, then the Republican presidential nominee, campaigned with a promise of delivering huge tax cuts that would benefit US businesses and allow them to more easily compete with China and other foreign markets.
After defeating Hillary Clinton to win the White House, Trump created and enacted the Tax Cuts and Jobs Act (TCJA) in 2017.
The Congressional Budget Office estimated this would benefit businesses to the tune of $320 billion and pass-through entities by $1.125 trillion over ten years; albeit with a cost of adding over $2.2 trillion to the national debt.
As part of TCJA, Trump sought to decrease corporate tax from its previous rate of 35% all the way down to 15%, although he was eventually forced to accept a figure of 21%.
TCJA has not been without controversy. The Democrats claimed it was a tax giveaway for the rich and polling in 2019 suggested more Americans opposed it than supported it. Despite criticism, Trump has remained fiercely loyal to TCJA and is determined to promote and preserve it.
This time around, Trump is once again campaigning on a ‘low taxes’ ticket; pledging income tax cuts to benefit hard-working Americans, tax credits for companies that “bring back jobs from China” and 100% expensing for essential industries.
If Trump wins the election, I predict:
- Even bolder tax legislation, potentially including further business-friendly updates to TCJA and a renewed bid to reduce corporate tax.
- Tax cuts or breaks for US businesses involved in the production or distribution of any effective Covid-19 vaccine.
- Tax cuts across multiple industries, focusing on (but not exclusive to) manufacturing, engineering and farming.
In the blue corner… Joe Biden
If elected, President Joe Biden would take a very different approach to tax. In stark contrast to Trump’s low tax economy, Biden would seek to increase taxes on big business and the wealthy.
His running mate Kamala Harris has declared she wants to abolish Trump’s TCJA – and with swathes of the act due to expire imminently, she could do just that. However, Biden has only committed to assessing the act and is likely to retain some parts of it while repealing those that don’t benefit low and middle-income Americans.
Biden has also said he wants to increase corporate tax from 21% to 28%, while Harris supports returning it to its pre-Trump rate of 35%.
In one rare similarity between the candidates, Biden – like Trump – has proposed a ‘Made in America’ tax credit that would cover the costs businesses incur in equipping and restoring facilities in the US.
If Biden wins the election, I predict:
- Corporate tax will rise and many of the perks enjoyed by businesses during Trump’s time in office will come to an end.
- A huge clampdown on tax evasion and inaccurate tax data, making compliance with US tax legislation more critical than ever before.
- Higher taxes on rich Americans in an effort to balance the books.
Whatever the result, a period of change for US businesses is looming. And when rates, rules and regulations are up in the air, the best organisations will ensure ultimate compliance and optimum efficiency through automation of all their tax processes. Contact us today for more information on how to achieve this.