Private Client Services Update – A Taxing Campaign: Clinton and Trump’s Individual, Estate, and Gift Tax Plans

    By , Estate, Trust & Wealth Transfer

    A Taxing Campaign: Clinton and Trump’s Individual, Estate, and Gift Tax Plans

    The 2016 election has been taxing for all of us in many ways, so we’re here to try to summarize Hillary Clinton and Donald Trump’s proposed tax plans as simply as possible and without any political opinions or analysis of wide-reaching implications in the case that either plan was to take effect. Each tax plan takes drastically different positions on the taxation of the wealthiest Americans and also has drastically different consequences for federal revenue, interest rates, and future spending. For a more detailed analysis of these plans and their implications, please see the Tax Policy Center’s Analyses at Clinton Analysis and Trump Analysis.


    On the individual income tax side, Clinton’s tax proposal would impose a 30% minimum tax on taxpayers with Adjusted Gross Income (“AGI”) of over $1,000,000—the so-called “Buffet Rule.” Clinton’s plan would also enact a 4% surcharge on a taxpayer’s AGI over 5,000,000. Clinton proposes to limit the tax value of certain deductions and exclusions to 28% for those taxpayers in the 33% and higher tax brackets. Additional tax credits would be available for caregiving expenses for elderly family members and high out-of-pocket health care expenses.

    If Clinton’s tax proposal governed in the 2017 tax year, taxpayers with annual incomes above $730,000 could expect their tax burden to increase more than $78,000 and thus see a reduction in after-tax income of approximately 5%. Taxpayers earning less than $300,000 annually could expect to see little change in their tax burden or after-tax income.

    On the estate and gift tax side, Clinton proposes to decouple the now combined estate and gift tax exemption. She would permanently set the estate tax exemption at $3,500,000 and set the lifetime gift tax exemption at $1,000,000. Neither the estate nor gift tax exemptions would be adjusted for inflation. Additionally, Clinton proposes to raise the top tax rate on estate and gift tax from 40% to 45%.


    On the individual income tax side, Trump proposes to collapse the current seven tax brackets ranging from 10% to 39.6% into three brackets: 10%, 20%, and 25%. Trump would also increase the standard deduction from $6,300 to $25,000 for single taxpayers and from $12,600 to $50,000 for taxpayers filing jointly. This increased standard deduction together with the existing personal and dependent exemptions would increase the amount of income exempt from tax by $18,700 for single taxpayers and $37,400 for taxpayers filing jointly. Although Trump proposes to raise the standard deduction, he has also discussed (but not detailed) a proposal to limit itemized deductions.

    If Trump’s tax proposal governed in the 2017 tax year, taxpayers would see an average tax cut of approximately $5,100. For taxpayers with incomes of over $3,700,000, taxes would decline by an average of $1,300,000 or approximately 19% of after-tax income. It is projected that middle-income households under the Trump tax proposal would receive an average tax cut of $2,700 or 4.9% of after-tax income.

    Trump would repeal estate, gift, and generation-skipping transfer taxes entirely. Although Trump has not announced whether his proposal would maintain the “step-up” for the basis of assets owned at death, it is assumed that he would support maintaining this tax incentive for taxpayers to hold on to assets until death.

    Members of our Private Client Services Group are poised to react to any changes in the income, gift, and estate tax regimes regardless of the outcome of the election and will be prepared to advise clients on any advisable modifications to their estate plans.

    The contents of this publication are intended for general information only and should not be construed as legal advice or a legal opinion on specific facts and circumstances. Copyright 2024.