This post was originally published on Forbes Sep 3, 2015
Is it too soon to do tax planning around the upcoming election? Maybe, but I think we can consider starting planning to plan and the Tax Foundation is going to make it easier for us as they present the alternative tax plans of the various candidates.
I managed to get some pretty specific tax positions from the Bernie Sanders campaign, which I shared with you last weekend. It is pretty clear that if, like it or not you are "feeling the Bern", you may want to look at your estate plan and possibly make some moves that you have been putting off and possibly gear up to be ready to accelerate capital gains. I wanted to see if I could come up with similar ideas assuming other winners, but I have been having trouble gathering good information. Thank God, for The Tax Foundation. They are assembling the tax reform proposals of the 2016 Presidential candidates on a website. That's the good news.
The bad news is that there is not much information there, yet. I spoke with analyst Scott Greenberg about the limitations of the data. The website only includes statements that the candidates have made about their tax ideas since January 1, 2015. They also have not included vague statements about simplifying the code, raising or lowering rates by unspecified amounts or closing loopholes. "..these broad aspirations are no substitute for concrete policy proposals". The Tax Foundation chart also does not include statements about using tax policy as a tool to provide health insurance subsidies or reduce greenhouse gases or other policy ends - "the chart only captures candidates' positions regarding the major structural elements of the federal tax system".
I asked Scott why they didn't include Ted Cruz's plan to shut down the IRS. My planning take away from the Cruz proposal was that if you were confident he would be elected and would follow through, you could just stop filing and paying now, since there would not be anybody to enforce the law by the time they got around to chasing you. The Tax Foundation viewed Cruz's "plan" if you could call it that more as an administrative reshuffling, since apparently other agencies would take up the remaining duties of the IRS. So I guess my "If you think Cruz is going to win, just stop paying" idea is not that great.
Here Is What They Have So Far
Given those constraints the chart is pretty meager at this point. Rand Paul and Marco Rubio are on the record about rates. Paul calling for a flat 14.5% and Rubio for two rates 15% and 35% with the higher rate kicking in at $75,000 ($150,000 for a married couple).
On capital gains Hillary Clinton has a proposal to stagger the long term rate out to six years in increments. Rand Paul would have capital gains at 14.5%, which apparently is his flat rate. According to the chart Bernie Sanders has a proposal to increase the net investment income surtax to 10%. That was not in the summary I got from the Sanders campaign, for whatever that is worth.
Rand Paul would replace the corporate income tax with a 14.5% business transfer tax. (I'm going to have to look into that further). Marco Rubio would lower the top corporate rate to 25%. Rubio and Paul would eliminate the estate tax. Sanders would lower the exclusion to $3.5 million and raise rates topping at 65% for billionaires.
That is not a lot, but Scott assured me that the chart will be updated as candidates release their plans.
If You Will Be Giving Do It Sooner Rather Than Later
There doesn't seem to be much there to do a lot of planning with. I have two things I would consider though. One is that if your estate is north of $5 million, you should really look at using up your unified credit ideally with a technique like a family limited partnership that leverages the credit. The other argument I would make is that if you have been contemplating doing something big involving a charitable deduction, it would be wise to do it sooner rather than later. Even Sanders is not calling for a higher maximum individual rate so you don't have that reason to hold off. There is a lot of talk about closing loopholes and even a proposal to limit the value of charitable contributions to 28%. On the other hand, you have Rubio and Rand calling for lower marginal rates. Either way the argument is strong that you should make major charitable moves sooner rather than later.