Skip to content

Understanding Donald Trump and Hillary Clinton's Tax Plans

2016-10-11 · explainer · John · 10:34 · watch on YouTube

Topic: US politics & society · mode: News analysis · tags: timely hook, civic or action cta

John explains the current US federal income tax system with three hypothetical families, then argues Clinton's plan raises taxes mainly on the wealthiest while Trump's cuts them mostly for the wealthiest and would add far more to the national debt, since tax cuts do not pay for themselves.

What is said

The parts of the video and what is said in each (★ — how much it matters to the video).

00:00:00 — Hook: a voter's tax question at Sunday's debate; plan to compare Clinton's and Trump's tax plans

  • ★ John says that at Sunday's presidential debate a voter asked how the candidates would make the wealthiest pay their fair share; the answers were interesting but limited. — 00:00:01
  • ★★ John says comparing Clinton's and Trump's tax plans first requires understanding the current US tax system, which is not uncomplicated. — 00:00:11 · Donald Trump

00:00:21 — How US federal income tax works today: three hypothetical families, marginal vs effective rates, deductions, exemptions, child tax credits

  • ★★ John sets up three hypothetical married couples with two children each: the Johnsons earn the median household income of $52,000, the Kennedys $300,000, the Roosevelts $1 million. — 00:00:21
  • ★★ John defines the top marginal rate as the rate on your last dollar (33% for the Kennedys) and notes income is taxed in brackets: first $18,450 at 10%, next ~$56,000 at 15%. — 00:00:33
  • ★★ John says under the current system the Kennedys pay about $66,424 (a 22% effective rate) and the Roosevelts about $336,500 (33.6%) in federal income tax. — 00:00:54
  • ★★ John explains that higher earners usually pay less thanks to deductions (charitable donations, some retirement savings, mortgage interest), itemized or via the standard deduction, currently $12,600 for married couples. — 00:01:14
  • ★★ John walks through the Johnsons' bill: standard deduction, $4,050 personal exemptions for four, about $2,553 owed, minus $1,000 credit per child, leaving $553, an effective rate just over 1%. — 00:01:40
    • a number in question (slip of the tongue): "$12,400" — check against the recording
    • a number in question (doubtful): "$39,600" — check against the recording
  • ★★★ John stresses that for the half of US families earning under $52,000 federal income taxes are quite low, and a large majority of those households pay none. — 00:02:22
  • ★★ John notes these families still pay payroll taxes (neither candidate would change them) and local sales and property taxes, so federal income tax policy can only do so much. — 00:02:36

00:02:51 — Hillary Clinton's tax plan: four main changes, effects on the three families, cost to growth and to the debt

  • ★★ John says he mostly uses the Tax Foundation's analysis, which is non-partisan but usually considered conservative-leaning. — 00:02:51
  • ★★ John quotes Clinton saying nobody earning under $250,000 will have their taxes raised, and calls it accurate: her plan mostly leaves the tax code unchanged, with four main differences. — 00:02:59
  • ★★ John says Clinton would tax income over $5 million at 43.6% instead of 39.6% and raise the capital gains rate on gains over $5 million from 20% to 24%. — 00:03:17
  • ★★ John says Clinton would require households earning over $1 million to pay at least a 30% effective rate, and would tax carried interest as ordinary income, closing that loophole. — 00:03:35
  • ★★ John says Clinton would double the child tax credit, add a new $1,200 credit for caregivers of elderly or disabled relatives, and change the estate tax and some corporate taxes. — 00:03:59
  • ★★ John says under Clinton's plan the Kennedys' and Roosevelts' taxes would not change (unless the Roosevelts claim huge deductions), while the Johnsons' would fall from $553 to zero. (hedged) — 00:04:17

  • ★★★ John says Trump's debate claim that Clinton is raising everybody's taxes massively is simply not true for the vast majority of Americans. — 00:04:34 · Donald Trump

    “that's just not true for the vast majority of Americans”

  • ★★ John says tax increases on the rich still cost something: they discourage investment, and the Tax Foundation projects the Clinton plan would cut long-term US output by 1% (others project much less). — 00:04:42

  • ★★ John says Clinton's new revenue would fund subsidized college, infrastructure and paid family leave; most non-partisan analyses find her tax and budget plans add about $200 billion to the debt over 10 years. — 00:04:57

00:05:13 — Donald Trump's new tax plan: brackets, deductions, effects on the families, revenue loss, tax cuts not paying for themselves, debt

  • ★ John says Trump's new tax plan is quite different from the one released in June that he discussed in an earlier video; at the debate Trump promised big tax cuts for the middle class. — 00:05:13 · Donald Trump
    • check: June — doubtful
  • ★★ John says Trump's plan has three brackets for married couples: 12% up to $75,000, 25% up to $225,000, and 33% above. — 00:05:25 · Donald Trump
  • ★★ John says Trump would cap deductions at $200,000 for married couples, make child care deductible, raise the standard deduction from $12,600 to $30,000, and abolish $4,050 personal exemptions. — 00:05:40 · Donald Trump
  • ★★ John says dropping personal exemptions would raise taxes somewhat for many single-parent or large families earning $60,000-100,000, about 7.8 million households. — 00:06:03
  • ★★★ John says under Trump's plan the Johnsons would pay $400 instead of $553, the Kennedys about $46,350 (about $20,000 less), the Roosevelts about $287,250: cuts concentrated on the wealthiest. — 00:06:18 · Donald Trump
  • ★★ John says Trump would cut the corporate tax rate from 35% to 15%, seek to bring back offshore profits like Clinton, and close the carried interest loophole. — 00:06:47 · Donald Trump
  • ★★ John says before macroeconomic effects Trump's plan would lower federal revenue by $4.4-7.2 trillion over ten years, depending on who does the math. — 00:06:58 · Donald Trump

  • ★★★ John grants lower taxes can encourage investment and growth, but insists tax cuts do not pay for themselves: the Reagan and Bush tax cuts boosted growth yet lowered federal revenues. — 00:07:10

    “that does not mean that tax cuts pay for themselves. They don't”

  • ★★ John says even the conservative-leaning Tax Foundation finds that after growth federal revenues fall $2.6-3.9 trillion under Trump's plan. — 00:07:30 · Donald Trump

  • ★★★ John says Trump proposes about $1 trillion in budget cuts but $500 billion more for the military; even rosy projections add about $2 trillion to the debt (10x Clinton), the Tax Policy Center $7.2 trillion (36x). — 00:07:40 · Donald Trump

00:08:08 — Why rising debt could matter: debt-to-GDP, Treasury rates, how a debt spiral works, 105% projection

  • ★★ John says US debt held by the public is about 77% of annual economic output: high, but near-zero Treasury rates show lenders aren't worried; trouble traditionally starts around 100-110%. (hedged) — 00:08:12
  • ★★ John explains a debt spiral: nervous lenders raise rates, government raises taxes or cuts spending, growth and revenue fall, costlier borrowing follows, ending like Greece; it takes decades to unwind. (hedged) — 00:08:39
  • ★★ John says a US debt spiral is very unlikely whoever wins, but the Committee for a Responsible Federal Budget projects Trump's plan raising debt to 105% of GDP in ten years, a very scary level. — 00:09:18 · Donald Trump

00:09:33 — Serious Republican plans cut entitlements or defense, Trump's does neither; summary of both plans

  • ★★★ John says serious, thoughtful Republican tax and budget plans exist, but cuts this large require cutting entitlements like Medicare or defense; serious Republican plans do one or both, Trump's does neither. — 00:09:33 · Republican Party, Donald Trump
  • ★★★ John summarises: Trump's plan cuts income taxes for most, with most benefits to the wealthiest and small rises for some middle-class families; Clinton's cuts them for middle-class families with children and raises them for the wealthiest. (hedged) — 00:09:51 · Donald Trump

00:10:11 — Links to analyses, answering in comments, register-to-vote ask, sign-off

  • ★ John points to non-partisan analyses linked in the description and says he will try to answer questions in the comments. (hedged) — 00:10:11 · doobly-doo
  • ★★ John urges viewers who are unregistered or unsure to check at youtube.com/howtovoteineverystate, since many states' registration deadline is today, and to vote. — 00:10:18 · How to Vote in Every State

In the description and comments

  • ★★ John cites Lily Batchelder's paper, and a PolitiFact story on the same topic, as the source for Trump's plan raising taxes for 7.8 million households. — video description · Donald Trump
  • ★ John recommends the Tax Policy Center's chart of effective tax rates by income size to viewers into this kind of thing. — video description
  • ★ John thanks Mark Olsen for graphics, Rosianna Halse Rojas for graphics and fact-checking, and Amanda McCloughlin and Adriene Hill for fact-checking, and says any errors are his own. — video description · Rosianna Halse Rojas

Threads in this video

Where the stories that moved here went next

Mentioned

Central: Donald Trump · Donald Trump tax plan · government debt · Hillary Clinton · Hillary Clinton tax plan · Tax Foundation · vicious circle

Also: People: Ronald Reagan

Projects: How to Vote in Every State

Organizations: Committee for a Responsible Federal Budget · Republican Party · Tax Policy Center · United States Armed Forces

Terms: doobly-doo

Concepts: capital gains tax · carried interest · corporate tax · debt-to-GDP ratio · economic growth · effective tax rate · Laffer curve · mandatory spending · ordinary income · personal exemption · tax bracket · tax deduction · United States Treasury security · voter registration

Places: Greece · United States

Events: 2016 United States presidential debates · United States presidential election

Policies: Bush tax cuts · child tax credit · Medicare · Social Security · Unemployment benefits

Only in the description or credits: Adriene Hill · Amanda McCloughlin · Lily Batchelder · Mark Olsen · PolitiFact · Rosianna Halse Rojas

Also centred on Donald Trump tax plan: Understanding the Tax Plans of Donald Trump and Ted Cruz

Also centred on government debt: The Greek Debt Crisis Explained in Four Minutes · Understanding America's Debt Problem · Understanding the National Debt and Budget Deficit

Also centred on Hillary Clinton: Nerdfighting in 2008, Pakistan, and Hillary Clinton · Obama Says Subscribe · VEEPSTAKES! · Benghazi: Explained · Clinton vs. Sanders: POLICY IS EXCITING! · Understanding Donald Trump and Hillary Clinton's Health Care Reform Proposals

Also centred on vicious circle: Stimulus Plan Explained · SYSTEMS!!!!

Replies to

Later videos replying to this one

Part of an exchange of 3 videos, 2016-10-11 – 2016-10-18.