By Rocky Mengle, Tax Editor | June 25, 2019 Updated March 2, 2020
When it comes to taxes, here’s what all 5 of the remaining Democratic primary challengers (in alphabetical order) are proposing.
- HOME STATE: Vermont
- AGE: 78
- HIGHEST OFFICE: U.S. Senator
As president, Sen. Bernie Sanders would push an ambitious progressive agenda that includes health care for all, jobs for all and college for all. So how would he pay for it all? Largely by taking away tax breaks or adding new taxes for corporations and the wealthy.
For example, to help fund his Medicare-for-all plan, Sen. Sanders would increase the top marginal tax rate up to 70% on Americans earning more than $10 million per year and limit tax deductions for anyone in the top tax bracket. He would also impose a 7.5% insurance premium tax on employers (the first $2 million in payroll would be exempt to protect small businesses). However, taxes would go up for middle-class families as well. Employees would be hit with a 4% income-based premium tax (the first $29,000 in income would be exempt for a family of four).
Sen. Sanders also has a “wealth tax” plan with a progressive rate structure. It would start with a 1% tax on net worth above $32 million for a married couple. The rate would increase to 2% on net worth from $50 to $250 million, 3% from $250 to $500 million, 4% from $500 million to $1 billion, 5% from $1 to $2.5 billion, 6% from $2.5 to $5 billion, 7% from $5 to $10 billion, and 8% on wealth over $10 billion. (The brackets ranges would be cut in half for singles.) There would also be a 40% exit tax on the net value of all assets under $1 billion and 60% over $1 billion for all wealthy individuals seeking to expatriate to avoid the tax. To enforce the tax, the plan also calls for the creation of a national wealth registry and additional third-party reporting requirements. The IRS would also be required to audit 30% of wealth tax returns for those in the 1% bracket and 100% audit of returns from billionaires.
Another idea to tax the rich that Sen. Sanders has touted as a candidate is his plan to create a higher, progressive estate tax. For 2019, only estates worth more than $11.4 million are subject to the federal estate tax, which is imposed at a 40% rate. Under Sanders’ plan, estates valued from $3.5 million to $10 million would be tax at a 45% rate; estates valued from $10 million to $50 million, at a 50% rate; estates valued from $50 million to $1 billion, at a 55% rate; and estates valued over $1 billion, at a 77% rate.
In addition, Sen. Sanders wants a new financial-transactions tax on stock, bond and derivative trades. The tax rates would be 0.5% for stock trades, 0.1% for bond trades and 0.005% for derivative trades. He wants to eliminate the payroll tax exemption for wages above $250,000, too. Currently, wages above $132,900 are not subject to payroll taxes. (Under Sanders’ plan, wages between $132,900 and $250,000 would still not be taxed.)
On the business side, Sanders wants to restore the corporate income tax rate to 35% (it’s currently 21%) and get rid of “virtually all corporate tax breaks and loopholes.” This includes transitioning to economic depreciation for all investments and further limiting the interest deduction to 20% of adjusted taxable income. He also wants to eliminate the use of offshore tax havens by, among other things, applying the same tax rate on offshore and domestic income. The 20% deduction on pass-through business income would also be repealed under Sanders’ plan, and large pass-through entities would be subject to corporate taxes.
Corporations with large pay gaps between their CEO and workers would also pay more taxes under Sanders’ “income inequality tax.” The plan is to raise the corporate income tax rate for companies with CEO to median worker ratios above 50 to 1. (If the CEO didn’t receive the largest paycheck in the corporation, the ratio would be based on the highest-paid employee.) The rate increases would range from 0.5% to 5%, depending on the company’s pay ratio. The tax increase would only apply to corporations with annual revenue of more than $100 million.
Rounding out his tax plans, Sen. Sanders is also calling for:
- Ending the special (lower) tax rates for capital gains;
- Eliminating tax breaks for executive retirement plans;
- Tripling the above-the-line deduction for educator expenses and adjusting it annually for inflation;
- Raising taxes on the fossil fuel industry;
- Providing tax credits for employers who hire workers displaced by his “Green New Deal” plan; and
- Taxing media ads to fund local “nonprofit civic-minded media.”
- HOME STATE: Delaware
- AGE: 77
- HIGHEST OFFICE: U.S. Vice President
While several Democrats running for president want to adopt a Medicare-for-all health care system, former Vice President Joe Biden would rather keep and improve Obamacare. As part of his plan to do this, he would eliminate the income-based cap on the premium tax credit so that all families who purchase insurance through a health insurance exchange can claim the credit. He would also increase the credit amount by basing it on the cost of a gold-level health plan, rather than a less-expensive silver-level plan. In addition, Biden’s health care plan would impose a tax penalty on pharmaceutical companies that increase drug costs by more than the rate of inflation and take away their deduction for advertising expenses.
The former Vice President has also proposed several tax changes to help senior citizens and those who care for them. First, his plan calls for increased tax benefits for elderly Americans who pay for long-term care insurance with their retirement savings. As president, Biden will also allow low-wage workers over 65 years of age to claim the earned income tax credit (currently, you can’t claim the credit if you’re over 65). To help protect Social Security, he would make all income subject to the Social Security payroll tax. (Wages above $132,900 are currently not subject to the payroll tax.) In addition, he would create a $5,000 tax credit for “informal” caregivers—family members or other loved ones—providing long-term care to the elderly. Caregivers would also be allowed to make “catch-up” contributions to retirement accounts.
Vice President Biden has issued a climate change plan that includes some tax provisions, too. His “Clean Energy Revolution” would be paid for by “reversing the excesses of the Trump tax cuts for corporations, reducing incentives for tax havens, evasion, and outsourcing, ensuring corporations pay their fair share, closing other loopholes in our tax code that reward work not wealth, and ending subsidies for fossil fuels.” More specifically, his plan calls for restoring the full electric vehicle tax credit (while aiming it at middle-class consumers), pushing tax breaks for energy efficiency, and increasing tax incentives for carbon capture, use and storage. He has also separately stated that he would support a carbon tax.
Biden’s plan to expand access to affordable housing calls for creating a new refundable tax credit of up to $15,000 for first-time homebuyers. The credit would be paid when qualified taxpayers purchase a home, instead of when they file their tax return the following year. He also wants to enact a new renter’s tax credit to reduce rent and utility costs to 30% of income for low-income individuals.
Other tax proposals coming out of the Biden camp include:
- Repealing Trump administration tax cuts for corporations and the wealthy, including raising the highest personal income rate back up to 39.6% and the corporate income tax rate to 28%;
- Imposing a 15% minimum tax on large corporations;
- Capping itemized deductions for the wealthiest Americans at 28%;
- Eliminating the step-up in basis for inherited capital assets, which means more taxes on heirs;
- Ending favorable tax rates on capital gains for anyone making over $1 million;
- Expanding the childcare credit to $8,000;
- Excluding student loan debt forgiven through the income-based repayment from taxation;
- Expanding the work opportunity tax credit to include military spouses;
- Enhancing tax breaks for low- and middle-income workers who are saving for retirement;
- Creating tax credits for small businesses that offer retirement plans for their workers; and
- Raising the global intangible low tax income (GILTI) rate on foreign profits from 10.5% to 21%.
- HOME STATE: Massachusetts
- AGE: 70
- HIGHEST OFFICE: U.S. Senator
Out of all the Democrats running for president, Sen. Elizabeth Warren has arguably had the most to say about taxes as a candidate. It started back in January, when she proposed the Ultra-Millionaire Tax (also known as the “wealth tax”). The annual tax would be equal to 2% on net worth above $50 million and 6% (3% before the senator’s Medicare-for-All plan) on net worth above $1 billion. A taxpayer’s “net worth” would consist of all assets worldwide, including residences, businesses, trusts, retirement funds and personal property worth $50,000 or more. Assets held by minor children would be counted, too. Other aspects of the plan include:
- Minimum audit rates for taxpayers subject to the tax;
- Deferred tax payments for up to five years for wealthy taxpayers with liquidity issues; and
- A 40% “exit tax” on the net worth exceeding $50 million of U.S. citizens who renounce their citizenship.
Sen. Warren is pushing a similar proposal for corporate income taxes—the Real Corporate Profits Tax. Under her plan, there would be a 7% tax on all corporate profits reported to investors above $100 million. There would also be no exemptions or deductions for the new tax.
To pay for her Medicare-for-All plan, Sen. Warren would rely on new tax revenue from, among other things:
- An expanded “wealth tax” (see above);
- A new “employer Medicare contribution” equal to 98% of the amount large employers (50 or more employees) currently pay for employee health insurance;
- Taxing capital gains income (excluding retirement accounts) annually for the wealthiest 1% of households (i.e., “mark-to-market taxation”), rather than at the time of sale;
- Raising the capital gains rates to match the tax rates for wages;
- Taxing amounts that employees currently pay for health insurance as wages (since that money would no longer be deducted from paychecks on a pre-tax basis);
- Raising the corporate income tax rate back up to 35%;
- Imposing a 35% country-by-country minimum tax on foreign earnings, without permitting corporations to defer the payments;
- Taxing foreign firms based on their U.S. sales;
- A 0.1% financial transactions tax on the sale of bonds, stocks or derivatives;
- Slowing down corporation depreciation deductions to match the rate at which assets actually lose value; and
- Better enforcement of existing tax laws.
The senator has a plan to expand Social Security, too. To pay for it, she’ll impose a 14.8% payroll tax on wages above $250,000. It would be split equally between employees and employers at 7.4% each. (The current Social Security payroll tax is 12.4% on wages under $132,900, which is split evenly between the employer and employee.) Her plan also calls for a new 14.8% Social Security tax on net investment income for individuals making more than $250,000 annually ($400,000 for families). This is designed to channel taxes on capital gains, as well as on wages, into the Social Security fund. The plan would also prevent self-employed workers from reclassifying income to avoid paying Social Security taxes.
Sen. Warren’s climate change plan doesn’t call for a carbon tax, but she has more-or-less expressed support for a carbon tax in separate statements. The senator’s official plan mainly relies on tax breaks to encourage environmentally friendly activity. For example, she wants to extend tax credits for zero-emission vehicles, wind power and solar power; build energy and pollution standards into federal housing tax credits; use tax credits to spur private investment in energy efficiency and electrification in residential and commercial buildings; expand refundable tax credits for installing energy-efficient upgrades; offer tax credits for reducing the carbon output of existing homes and businesses, including subsidizing weatherization for low-income households; and provide refundable tax incentives to speed utilities’ deployment of smart grid and advanced transmission technologies.
Under the senator’s lobbying tax plan, companies that spend between $500,000 and $1 million per year on lobbying would pay a 35% tax on those expenditures. The rate would increase to 60% for every dollar above $1 million spent on lobbying, and to 75% for every dollar above $5 million.
As part of her plan to address gun violence, Sen. Warren wants to increase the excise taxes on guns and ammunition. Currently, handguns are taxed at 10% and other guns and ammunition are taxed at 11%. Sen. Warren has proposed raising those rates to 30% on guns and 50% on ammunition.
In 2019, Sen. Warren has also introduced or co-sponsored legislation in the U.S. Senate that would:
- Allow same-sex couples to file amended returns to get refunds for tax years before they could file joint returns;
- Create a new $3,000 tax credit for working family caregivers;
- Exempt certain military survivor benefits received by children from the “kiddie tax” on unearned income of a child;
- Treat “carried interest” profits received by fund managers as ordinary income rather than capital gains;
- Expand the earned income tax credit and the child tax credit;
- Cancel up to $50,000 in student loan debt for every person with household gross income of $100,000 or less, but not treat the canceled debt as taxable income;
- Allow graduate students to deposit funds from a stipend or fellowship into an IRA;
- Establish a refundable adoption tax credit;
- Provide a tax credit for donating land for the completion of America’s national trail system;
- Prevent drug manufacturers from claiming tax deductions for consumer advertising expenses;
- Regulate tax preparers; and
- Simplify and decrease the costs of filing taxes.
She also introduced a housing bill last year that would be funded by moving the estate tax thresholds back to their 2009 levels and establishing more progressive estate tax rates. She has also called for the elimination of a stepped-up basis for inherited assets.
- HOME STATE: Hawaii
- AGE: 38
- HIGHEST OFFICE: U.S. Representative
As a presidential candidate, Rep. Tulsi Gabbard hasn’t talked all that much about taxes. She has repeated the standard Democratic line about the 2017 tax reform law overwhelmingly benefiting wealthier Americans, and she generally supports more taxes to pay for new social programs, but tax policy certainly doesn’t seem to be at the center of her campaign.
Nevertheless, as a member of Congress, Rep. Gabbard has supported tax incentives that encourage or reward:
- Businesses that help workers pay off student loans;
- Lower prescription costs;
- More low-income housing;
- Veteran-owned small businesses;
- Donations to political campaigns by ordinary Americans; and
- Renewable energy creation and use.
She has also come out against tax breaks for the fossil fuel industry.
- HOME STATE: New York
- AGE: 78
- HIGHEST OFFICE: Mayor of New York City
Former New York City Mayor Michael Bloomberg does not support the type of “wealth taxes” proposed by Sens. Warren and Sanders. Nevertheless, he supports increased taxes on the wealthy. For instance, he has called for restoring the top rate on ordinary income from 37% to 39.6%, taxing capital gains at the same rate as ordinary income for taxpayers above $1 million, and imposing a 5% surtax on incomes above $5 million a year.
Other proposals that would tax wealthy Americans more heavily include:
- Closing the 20% deduction for “pass-through” income;
- Repealing the “like-kind” provision that lets real-estate investors defer tax indefinitely;
- Ending the treatment of “carried-interest” as a capital gain;
- Lowering the estate-tax threshold so that more estates are taxed;
- Eliminating stepped-up basis for unrealized capital gains at death; and
- Imposing a 0.1% financial transactions tax.
On the business side, the mayor wants to increase the corporate income tax rate from 21% to 28%, raise the minimum tax on foreign income and apply it on a per-country basis, and tighten rules on transfer pricing and reporting of foreign taxes.
Mayor Bloomberg has also put forth tax proposals that would benefit ordinary workers. For example, he supports earned income tax credit (EITC) reform that would simplify the rules so that the credit is easier to administer, pay it monthly instead of annually, and provide help applying for the tax break for qualifying families. If elected president, he’ll also look into expanding the EITC to cover family caregiving and other forms of unpaid or ineligible employment.
He is also taking aim at the child tax credit. The mayor has called for increasing the credit, making it fully refundable, and phasing it in faster.
The Mayor also wants to increase incentives for hiring veterans by expanding the Returning Heroes and Wounded Warriors tax credits. He has proposed forgiving student loans tax-free after 20 years, too.
To help the environment and address climate change, Mayor Bloomberg wants to ending all subsidies for fossil fuels, including repealing tax breaks for drilling new oil and gas wells, eliminating deductions for royalties paid abroad, and doing away with excessive deductions for declining well production. If elected president, he will push for extended and expanded solar and wind tax credits, and create new tax incentives for private companies to improve clean-energy technology (including battery storage and green hydrogen). To combat climate change, he supports a border adjustment (i.e., charges on imports and a tax break for exports) for emissions-intensive goods.