Joe Biden vs. Donald Trump: Tax and Economic Policies

This story originally appeared on SmartAsset.

Though the COVID-19 pandemic has eaten up most of the political headlines this general election season, the contest of Joe Biden vs. Donald Trump does feature a number of deep differences in other areas beyond the public health crisis, including on tax and economic policies.

The actual distinctions between the presidential candidates on issues of taxes and finance can be difficult to parse for the average voter, so this guide will go through some of the major issues related to the subject and explain exactly where the two candidates stand.

Biden vs. Trump: Tax brackets

One of the major victories for the Trump administration over the past four years is the tax plan that passed Congress and was signed by the president in 2017. This was a major overhaul of the tax system and established new tax brackets for 2020 (filed in April 2021).

This plan was actually not as radical as the plan the Republicans originally proposed, which would have reduced the total number of brackets to just four. And, of course, it isn’t the flat tax that many tax hawks dream of.

Still, it was generally seen as a win for high-income earners, who saw their tax rate lowered.

Biden has not released an official plan for sweeping changes to the tax system, but he is calling for the highest tax bracket rate to be restored to 39.6%, where it stood before the 2017 bill.

Biden has said he will not raise taxes on anyone earning less than $400,000, so the other brackets rates seem unlikely to be touched by his administration. Discover more specifics on Joe Biden’s tax plan.

Biden vs. Trump: Corporate tax rate

This is another area where Biden looks to reverse changes the Trump administration (along with Republicans in Congress) made through the 2017 Tax Cuts and Jobs Act. That law lowered the corporate income tax rate from 35% to 21%.

Trump hasn’t brought up lowering it any further, and it seems unlikely that he would given that his party just made major changes to the tax code.

Biden, meanwhile, is calling for the corporate income tax rate to be raised — though not to the level it was before 2017. Instead, he wants to settle in the middle with a new corporate tax rate of 28%.

Biden has two other major points in terms of corporate tax policies: He wants to establish a minimum 15% tax for corporations, meaning that regardless of any tax breaks or other loopholes, every corporation pays at least 15% income tax on all revenue reported to investors.

Biden also plans to tax foreign profits of American corporations at 21%, while Trump’s bill placed this rate at 10.5%.

Biden vs. Trump: Tax deductions

Deductions are used on a person’s tax return to lower the income on which they have to pay federal income tax. In Trump’s 2017 bill, the standard deduction for a single filer was increased from $6,350 to $12,400, and double that, $24,800, for a married couple filing jointly. So only those with deductions exceeding those levels are now better off itemizing their deductible expenses.

Biden’s plan further limits the value of deductions for those in the highest brackets. He suggests capping the benefit of an itemized deduction to 28% of its value, which will limit the ability of wealthy people and families to cut their tax liability through things like charitable contributions.

For example, if you’re in the top 37% bracket (meaning your joint income is more than $622,000 in 2020) every dollar you can now deduct reduces your taxes by 37 cents. Under Biden’s plan, that same dollar of deductions would reduce your tax bill by only 28 cents.

Biden vs. Trump: Capital gains taxes

Here is one tax issue where Trump is floating further changes.

Capital gains refers to money investors make they sell an asset — for instance, a stock or bond — for more than they bought it for. Short-term gains, meaning gains on assets owned less than a year, are currently taxed as ordinary income. Long-term gains are now taxed at rates from zero to 20%, depending on income, which can be significantly less than regular tax rates, which go up to 37%.

Trump recently floated the notion of lowering this tax as part of what he calls a plan to lower overall middle-class tax burdens.

Biden, meanwhile, wants to tax long-term capital gains at ordinary rates for those earning $1 million or more.

For instance, if a person earns more than $1 million, under Biden’s plan additional money earned through long-term capital gains would be taxed at 39.6%, instead of 20% under the current system (or perhaps even lower if Trump gets his way).

For taxpayers earning less than $1 million, rates would remain the same.

Biden vs. Trump: Financial transactions tax

A financial transaction tax is just what it sounds like — a levy for making certain transactions on financial markets. It is a favorite of economic progressives, as it would raise more money from the capitalist class that does not directly produce anything but instead moves around currency as a way of increasing wealth.

During the Democratic primaries, it was a particular favorite policy of Sen. Elizabeth Warren. Even Mike Bloomberg, hardly an economic progressive, thought a financial transactions tax could be of benefit.

Biden has expressed support for a financial transactions tax, but it is not part of the tax plan he has published.

Trump has not issued any major public statements on a financial transactions tax, but given his general friendliness to the wealthy and the Republican Party’s ideological aversion to any new taxes, it seems reasonable to assume he does not support it.

Biden vs. Trump: Trade

Trade may not impact individual consumers as directly as issues like tax rates and deductions, but the nation’s trade policies do end up impacting everyone at the end of the day. As such, it is worthwhile for the average voter to consider how each candidate approaches trade.

Beneath all of the tweets, congressional exchanges and other scandalous dirty laundry aired each evening on the news, trade has been one of the areas of public policy where the Trump administration has done the most in the past four years.

Trump dropped out of the Trans-Pacific Partnership (TPP), renegotiated the North American Free Trade Agreement (NAFTA), renaming it the United States-Mexico-Canada Agreement, and engaged in what many call a “trade war” with China.

Trade is complicated, but generally speaking, Trump has vied to orchestrate trade deals that he determines are best for American companies and workers while forgoing a more cooperative approach.

Biden, on the other hand, is a more traditional liberal free trader. He wants to work with American allies to combat the rise of China as an economic superpower rather than attempt to do it alone as Trump has done.

Biden has said he would renegotiate the TPP, potentially clearing the way for the U.S. to get back into the pact. That, of course, might upset some of the economic populists who are already wary of the former vice president.

Biden vs. Trump: Economic winners and losers

Though it’s hard to look ahead and accurately predict exactly who will win and lose economically in a potential presidential administration, the policies laid out above do give us the ability to make some generalizations about who will do better under each potential president.

If Trump is reelected, corporations and the wealthy can expect to keep doing well. The president has cut taxes for both and shows no signs of wanting to reverse any of that.

A Biden administration, meanwhile, would likely hit corporations and the wealthy in the pocketbook — though not as hard as a Bernie Sanders or Elizabeth Warren administration might have.

Furthermore, with Trump not raising revenue, any expansion of social programs seems unlikely.

Biden, meanwhile, plans to raise revenue that could potentially be used to expand on a number of social programs, including possibly creating a public option as part of the Affordable Care Act, which was his compromise position to expand access to health care while not creating a true single-payer health care system.

The two candidates for the highest office in the U.S. have some stark differences on trade and economic issues. Generally, Trump’s approach is more beneficial to corporations and high earners, while Biden seeks to make these entities and people pay a bigger share of their wealth to support government programs.