Potential Tax Policy Implications of the November Presidential Election

The tax implications of the 2024 presidential election will depend significantly on the policies and platforms of the winning candidate and their party. However, if we focus on the prospective candidates from the two major parties, former President Donald Trump and President Joe Biden, the potential tax implications are becoming clearer.

In general, it’s anticipated that former President Trump would propose keeping most of the tax policy changes implemented with the 2017 Tax Cuts and Jobs Act (TCJA) in place, while President Biden seems likely to propose increasing tax rates, particularly for higher income earners.¹ Since much of the TCJA laws are set to expire on Dec. 31, 2025, there’s sure to be increased campaign messaging from both presidential candidates around their proposed tax policies.

Here are some potential areas where tax policies might have an impact, depending on which candidate wins the presidency:

1. Income taxes

• Democratic Policies: The rumored, primary tax proposals include increasing taxes on high earners ($400,000 and above), which could be as high as 39.6% for single filers and joint filers with income above $450,000, whereas the tax cuts for households under $400,000 would remain the same.² The net investment income tax (NIIT), applied to certain investments, estates, and trusts, and the additional Medicare tax could rise from 3.8% up to 5% for filers with income above $400,000.
• Republican Policies: The tax law changes in 2017 have generally been seen as a success by the party and permanent individual income tax cuts have been proposed. Another proposal calls for eliminating income tax, and replacing it with a national sales tax (consumption tax).³ The 2024 individual income tax rate for a single filer making $400,000 is 35%; the rate for joint filers with income above $450,000 is 32%.⁴ Currently, for individuals making $200,000 and joint filers making $250,000, the NIIT rate is 3.8% and the additional Medicare tax is 0.9%.⁵ One recommendation by advisors is to repeal the NIIT.⁶

2. Corporate taxes

• Democratic Policies: Corporation income tax rates for C Corps could rise from the current 21% flat tax to as much as 28%. The global intangible low-taxed income (GILTI) tax rate, for earnings from controlled foreign corporations, would go up to a proposed 21% from 10.5%. The stock buyback tax could raise to a proposed 4% from 1%. The NIIT rate proposal could expand to active pass-through income, which is reported by business owners as individual instead of corporate earnings for tax purposes.
• Republican Policies: The focus here may be to maintain the corporate tax rate at 21% or to reconsider a proposal to reduce corporate tax rates to as low as 15%, a rate Trump floated during his former presidency,⁷ along with increasing the child tax credit and standard deduction.

3. Capital gains taxes

• Democratic Policies: Proposed tax rate changes to long term capital gains and qualified dividends, typically 20% for high-income earners, may include having regular income tax rates apply for earnings above $1 million and for long-term capital gains (property held for more than a year).⁸ In addition, there may be a proposed minimum tax rate of 20% on unrealized capital gains for homes owned by those with net worth above $100 million.
• Republican Policies: There may be proposals on reducing capital gains tax rates as low as 15% or maintaining the current 20% rate, plus raising the current 15% taxable income bracket on long-term capital gains from $47,026 for single filers.

4. Estate taxes

• Democratic Policies: There will likely be a proposal to lower the estate tax exemption threshold in place through 2025 ($13.61 million in 2024.)⁹ Also a proposal to eliminate the basis step up provision, which adjusts an asset’s market value to the time of a person’s death rather than time of purchase, resulting in lower capital gains for the heir.
• Republican Policies: Potential proposals include eliminating estate taxes, capping at 20%, or further increasing the exemption threshold as well as extending the TCJA deadlines beyond 2025. Ensuring the basis step up provision stays in place is also considered important and will likely be proposed as permanent.

5.  Tax credits and deductions

• Democratic Policies: There may be a proposal to increase the Child Tax Credit (CTC) up to as much as $3,600 and permanently make it fully refundable; it’s currently $2,000 per dependent under age 17 with $1,700 potentially refundable, for qualifying taxpayers.¹⁰
• Republican Policies: Beyond extending the tax credit changes implemented with TCJA, which doubled the CTC at the time and expanded those eligible, for instance, while also capping state and local taxes at $10,000 per taxpayer. Additional deductions and credits could get proposed.

6. Health care taxes

• Democratic Policies: There could be a proposed introduction of new taxes to fund universal, expanded health care programs, such as Medicare for All or a public option.
• Republican Policies: There may be proposals to repeal or reduce taxes associated with the Affordable Care Act (ACA), potentially including the individual mandate penalty or taxes on high-cost health plans.

7. Environmental and carbon taxes

• Democratic Policies: There will likely be proposed raises in taxes for the fossil fuel industry of nearly $97 billion over the next 10 years, replacing existing provisions for raising $31 billion over the same period.¹¹ As was proposed in 2023, a repeal of the base erosion and anti-abuse tax (BEAT), which was in the TCJA and allows companies to avoid taxes by moving profits out of the U.S. The proposed replacement would be an undertaxed profits rule (UTPR) which sets a minimum tax rate to curb avoidance of a multinational corporate tax.
• Republican Policies: There will likely be resistance to any newly proposed environmental taxes, with a focus on reducing regulations. For instance, there may be an effort to repeal the 2022 Inflation Reduction Act which included a tax credit on purchasing an electric vehicle, as well as other credits and incentives related to green energy.

8. Tariffs and trade

• Democratic Policies: The tariffs on China will likely increase, up from 7.5% to 25% on most imports, while there will be additional proposed tariffs on steel, aluminum, green energy, and medical goods.¹² The tariff could be as much as 100% on electric vehicles and 50% on solar components.
• Republican Policies: The proposals will likely focus on a 60% tariff on U.S. imports from China, while proposing a 10% tariff on imports from other countries. Other proposals include matching taxes on foreign imports to those the country imposes on its exports to the U.S., or a border adjustment tax which would impose taxes on imports to another country and not on exports to it.

The specific tax implications will become clearer as candidates release detailed policy proposals and as the political landscape evolves leading up to and following the election. Voters should pay close attention to the tax platforms of the candidates to understand how their personal and business taxes may be affected.

If you’re not currently a client of Mercer Advisors and want to know more about the importance of tax planning, let’s talk.

*At the time of publishing, this article addresses some of the potential tax implications which could change up to and after the election.

1.“Tracking 2024 Presidential Tax Plans,” Tax Foundation, 2024.

2.“Details and Analysis of President Biden’s Fiscal Year 2025 Budget Proposal,” Tax Foundation, March 22, 2024.

3.“2024 Tax Brackets and Federal Income Tax Rates”, NerdWallet, May 30, 2024.

4.“What is national consumption tax? What House Republicans want to change with FairTax Act.” USA Today, Feb. 19, 2023.

5.“Conservatives Lay Out Their Second Term Trump Tax Policy,” Tax Policy Center, Feb. 29, 2024.

6.“Net Investment Income Tax (NIIT),” Forbes Advisor, Feb. 23, 2023.

7.“Trump advisers plot aggressive new tax cuts for second White House term,” The Washington Post, Sept. 13, 2023.

8.“Capital Gains Tax Rates for 2023 and 2024,” Forbes Advisor, Nov. 15, 2022.

9.“What is the Gift Tax Exclusion for 2024?,” Kiplinger, Apr. 21, 2024

10.“Child Tax Credit 2024: Requirements, Who Qualifies,” NerdWallet, June 5, 2024.

11.“A Guide to the Fossil Fuel Provisions of the Biden Budget,” Tax Foundation, Sept. 27, 2023.

12.“Comparing New and Current U.S. Tariffs on Chinese Imports,” Visual Capitalist, May 16, 2024.