This article was posted on Tuesday, Nov 01, 2016

Clinton Economic Plan: Higher Taxes, Spending and More Government

Hillary Clinton laid out her ambitious plan to jump-start the economy but upon examining the plan further, it may do just the opposite.

Her plan includes raising income taxes by $1.2 trillion over 10 years with over 90% of the burden on America’s top 5% highest earning households. The top 1% of households, for example, would see their tax burden go up by $78,000 a year on average according to the non-partisan Tax Policy Center.

But there’s more. She would also impose the so-called “Buffett Rule,” requiring those with adjusted gross incomes over $1 million to pay a minimum of 30% of their income in taxes. On top of that, she would impose a 4% surcharge on adjusted gross incomes over $5 million. 

Clinton also plans to make it harder to claim capital gains, which today are taxed at 20% on realized gains from investments held for more than one year. She would require investments to be held for more than six years to qualify for that same rate. 

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Clinton also plans to make it harder to claim capital gains, which today are taxed at 20% on realized gains from investments held for more than one year. She would require investments to be held for more than six years to qualify for that same rate. Anything less would be taxed on a “sliding scale.” Investors would pay the “ordinary income” tax on capital gains from investments held less than two years.

The “Death Tax”: Clinton would tax estates worth more than $3.5 million ($7 million for married couples.) That’s below today’s estate tax exemption level of $5.45 million ($10.9 million for couples). She would also raise the top estate tax rate from 40% to 45%.

On the Big Government side, she wants to increase federal spending by $1.4 trillion over 10 years. She says she wants to give tax cuts to lower income Americans but lacks specifics on how to pay for it. Her plan would require companies with 50 or more employees to offer 12 weeks of paid family or medical leave per year, at a minimum of two-thirds of their current salary.

Her Expanded Childcare Plan and Early Education Plan would spend$275 billion over 10 years for states to make pre-school available to all four-year olds. The government would fund a new National Infrastructure Plan to spend $275 billion over 10 years to repair or expand roads, bridges, public transit, airports, etc.

Hillary wants to spend another$350 billion over 10 years for her “debt-free college plan” – which I suspect is another empty promise to the Left that she knows she can’t deliver on. These are just the highlights of Clinton’s spending plans.

Ms. Clinton would raise the minimum wage to $12-$15 per hour in stages, increase workers’ benefits, expand overtime and encourage businesses to share profits with employees. Remarkably, her economic plan includes no corporate tax reform, even though we have the highest federal corporate tax rate (35%) in the developed world. 

Trump Economic Plan: Looks a Lot Like Reagan’s Tax Reforms

Trump outlined his national economic plan in Detroit. Much of his program consists of powerful pro-growth, supply-side policies that have worked before – and could work again, if given a chance. They include: Across the board income tax cuts, helping especially those with middle incomes. Tax simplification, with a reduction in the number of tax brackets from seven to three – 12%, 25% and 33%. The plan also states, “For many American workers, their tax rate will be zero.”

Tax cuts for U.S. businesses, which today face the highest rates in the industrial world. Trump would cut business taxes from 35% to just 15% of income, a move that would instantly end most “corporate inversions” – companies relocating headquarters overseas.

His plan would also unlock as much as $2 trillion in corporate cash now held by companies abroad by taxing it at just 10% when it’s returned from overseas. The U.S. would instantly become one of the most business-friendly countries in the world.

Deduction of child care spending from taxes – a move that will help many middle-income families and boost the U.S. labor force, which has seen 14 million people depart since President Obama took office.

End the Death Tax. Today, taxes on estates often keep entrepreneurs and small business people from passing their businesses on to their survivors. Often in the case of farms and small businesses, the tax forces a sale of the assets merely to pay the estate taxes.

A regulatory moratorium and, ultimately, a regulatory rollback to shrink the 80,000+ pages now in the federal register and the $2 trillion in annual costs imposed on the economy by out-of-control regulation.

“Unleash the energy revolution by lifting restrictions on all sources of American energy,” including the vast energy resources held by the federal government, to make the U.S. the world’s No. 1 energy powerhouse. Trump cites estimates from the respected Institute for Energy Research that opening up federal lands for energy exploration would lead to a $127 billion a year increase in GDP, over 550,000 new jobs a year and a $32 billion hike in annual wages over the next seven years. Trump also vows to resurrect the Keystone Pipeline.

As with the discussion of Hillary’s economic plan, the highlights of Trump’s plan above are also not complete. 

Which National Economic Plan is Better? Kudlow Weighs In

Most of my clients and readers already know which economic plan I think is better. So rather than give you my opinions, I will reprint some comments from CNBC’s popular host Larry Kudlow who compared and contrasted both plans in a RealClearPolitics article:

“[Trump] wants to lower taxes across-the-board for individuals and large and small businesses, significantly reduce burdensome regulations, and unleash America’s energy resources. (Hillary would end coal and oil-and-gas fracking.)

Trump’s corporate tax reform would restore America’s position as the most hospitable investment climate in the world. For a change, businesses and their cash would come back home.

Clinton derides Trump’s plan as more ‘trickle-down economics.’ But she forgets something. Post-war economies prospered most following the JFK and Ronald Reagan tax cuts. In fact, in his second term, her husband followed the incentive-model of growth by reducing taxes and reforming welfare, with excellent economic results.

The contrast between the two economic-policy strategies couldn’t be clearer. Clinton has a recession strategy. Trump has a recovery strategy.

So why not give tax and regulatory relief a try. It’s been missing for seven-and-a-half years. Why not try something different for a change?” 

Gary D. Halbert is the president and chairman of Halbert Wealth Management, Inc. His Forecasts & Trends Weekly E-Letter may be obtained free of charge by subscribing at