Laws governing political advertising make it difficult for politicians to outright lie in their ads. At the same time, they can hedge their bets with vague information open to interpretation. And when it comes to taxes, a U.S. president can’t change tax laws without Congressional approval. Biden and Trump’s taxes, similarly, reveal much about their tax strategies.
We can, however, glean some reliable assumptions based on historical context and the candidates’ published proposals. Based on the disclosed tax proposal information available, taxpayers very well could be affected by the winners of the 2020 elections as early as 2021. But this really lies more heavily on the outcome of Senate races than the presidential victor.
Where’s the Devil in these Details?
While very few details are available from either party, basically, a Democratic majority likely will repeal many of the tax reforms set into place by the current Trump administration and Republican-ruled Senate, most notably the Tax Cuts and Jobs Act (TCJA). This lowered taxes primarily for big business, high-wealth individuals, estates and trusts. Under Trump’s stated plans, he would try to broaden this and make it a permanent tax law.
Biden’s camp, on the other hand, would seek to abolish parts of that tax structure and increase the tax burden on corporate and high-income earners. Lower income families could see even more reductions in their available deductions under Trump, while Biden and the Democrats could improve the average income of middle- and lower-income taxpayers.
Small businesses may not see much relief from either camp, as tax filing becomes ever more arduous and exhausting. At the same time, a vast majority of small business owners have not seen as much tax relief as large corporations under the current TCJA that’s been in effect since 2017.
What Do the Tax Filings of Presidential Candidates Say About Them?
Official tax returns still aren’t available from Donald Trump, but recent New York Times revelations stand as a fairly reliable source. And while the IRS remains mum on any ongoing audits, it’s likely that most of Trump’s deductions fall within the law — however close to the line they come.
Vice-President Joe Biden and his wife paid much higher taxes, as revealed in their official documents, which they released in September. They don’t own any businesses, which leaves them out of the business deduction game. They live in a state with low caps on some of their deductions, such as those for real estate. Joe Biden has been in public service jobs since he graduated from law school in 1972, so his income never got to seven figures. In 2020, U.S. Senator salaries average about $174K a year.
Tax Analysis Can’t Be Painted with a Broad Brush
Overall, it’s difficult to apply a broad-brush approach to taxes. The nature of the political language on tax issues makes a specific direction nearly impossible to decipher accurately. There are also so many variables that affect final outcomes in tax reform. For one, in 2021, after all the seats are filled, the president and Congress still will be debating how to address the economic impacts caused by the coronavirus.
The state of global relations and trade deals, as well as the risk aversion levels of Congress, must be considered when trying to foretell the future of the American tax structure. And as politicians seem to always be campaigning, Congressional and local representatives will be watching closely their constituents’ levels of satisfaction with their own tax burdens — or lack thereof.