Comparing Hillary Clinton’s 7 Brackets and Donald Trump’s 3: Which Tax Plan is Better and Why?
As Randall Burns has pointed out, both tax plans presented by Hillary Clinton and Donald Trump are fairly traditional. Clinton's plan aims to simplify the tax system, while Trump's plan leaves income tax rates largely unchanged, but introduces a reduction for the wealthiest Americans.
Traditional Tax Plan Structures
Both Clinton and Trump’s tax plans prioritize different aspects of the tax system. Clinton’s plan proposes a more progressive tax structure with seven income tax brackets, designed to address income inequality. On the other hand, Trump’s plan focuses on fewer, broader brackets and significant tax cuts for high-income earners, aiming to stimulate economic growth.
Government Revenue Impact
The comparative analysis of these tax plans reveals significant differences in their projected government revenue and expenditure. According to the non-partisan Tax Policy Center, Clinton’s plan would generate an additional $30 billion per year, equating to a total of $1.08 trillion over the next decade. This extra revenue would primarily come from increased taxes on the wealthiest Americans. The majority of this additional income would be allocated towards spending on infrastructure, education, and other public services.
In contrast, Trump’s plan would result in heavy government costs. The plan would cost the government as much as $545 billion per year, leading to a net cost of $545 billion per year. The tax breaks under Trump's plan are predominantly aimed at benefiting the wealthiest individuals and corporations, as highlighted by the Tax Policy Center's breakdown of the tax breaks across different income classes:
Lowest Earners: -$0.9 billion
Working Poor: -$2.8 billion
Middle Class: -$4.3 billion
Well-To-Do: -$4.3 billion
The 1%: -$11.8 billion
The net cost of $545 billion per year indicates that Trump’s tax breaks are heavily concentrated among the wealthiest 1% of the population, suggesting a significant shift in the economic distribution towards the wealthy.
Tax Loopholes and Resource Allocation
The larger issue with both tax plans is the handling of tax loopholes. Despite the large difference in the number of tax brackets, the effectiveness of the tax system lies in closing these loopholes, which primarily benefit the wealthy. Wealthy individuals can afford to hire top-tier accountants and attorneys to exploit these loopholes legally, often leading to significant tax evasion or underpayment.
Addressing this issue is crucial. Tightening these loopholes can ensure fairer tax distribution and efficient resource allocation. The wealthy have the means to exploit complex tax laws, making it essential to streamline and simplify the tax system while ensuring that the rich contribute their fair share.
Conclusion
The debate over which tax plan is better between Clinton’s seven brackets and Trump’s three comes down to the primary goals of these plans. Clinton’s plan aims to promote social equality and fund critical public services, while Trump’s plan seeks to stimulate economic growth by providing tax cuts to the wealthy. Both plans have their merits and drawbacks, but the more pressing issue is the need to close tax loopholes to ensure a fair and effective tax system.
Ultimately, testing both plans simultaneously is impossible, but addressing the issue of tax loopholes is a necessary step. By doing so, the government can ensure that resources are allocated equitably and that all taxpayers contribute according to their ability to pay.