Trump vs Biden compare on key tax issues

Trump vs. Biden: Background on tax rates

The differences in the presidential candidates’ tax proposals are stark, and they’re compounded by the pandemic which has created more economic uncertainty and need for financial assistance. President Trump presided over significant tax reform with the enactment of the Tax Cuts and Jobs Act of 2017, and there’s talk of retaining and possibly expanding those cuts. Vice President Biden’s tax plan calls for higher corporate tax rates and having high-wage earners pay taxes toward Social Security on a higher percentage of their income.

President Trump

Vice President Biden

Tax reform
The reduction in the corporate rate to 21% from 35% was the cornerstone of the 2017 tax law, which made it easier for companies to deduct capital-investment costs and retain their foreign profits. President Trump says he would lower it to 20% during a second term.

Payroll taxes
In August, President Trump issued an executive order that allowed employers to temporarily stop collecting Social Security payroll taxes for employees whose wages are less than $4,000 for a biweekly pay period. Employers are now expected to collect additional amounts from employee paychecks in early 2021 to repay the tax obligation.

Tax reform
Vice President Biden is campaigning on a corporate rate increase to 28% — which would still be lower than what it was in 2016 — while also putting forth plans to provide and expand tax credits for lower- and middle-income families.

Payroll taxes
Under a Biden administration, while earnings immediately above the current taxable maximum would continue to be exempt from Social Security taxes, earnings above $400,000 would be taxed at the 12.4% rate. However, the new taxes on earnings above $400,000 would not trigger additional benefits.

Employer takeaways

Low corporate rates are only as solid as Republicans’ ability to remain in power. Democrats, with a chance to control the Executive and Legislative branches for the first time in a decade, would likely force companies that have planned for the 21% rate to adjust.
Following his executive order, President Trump asked Congress to forgive any payroll taxes that are deferred this year, but that may not amount to much because few employers have opted to defer those taxes. He has also talked about eliminating payroll taxes, but the idea hasn’t received much support from either side of the aisle.