WASHINGTON – Hillary Clinton’s tax plan would increase federal revenue by $1.4 trillion over 10 years, helping lower federal debt, while Donald Trump’s plan would increase the federal debt by $7.2 trillion, according to the Tax Policy Center.
In a report released Tuesday, TPC updated its earlier analysis of the presidential candidates' tax plans. The latest report takes into account several new proposals from Clinton since March, including an increased child tax credit, increased estate tax rates, reformed capital gains taxes and several small business tax proposals. It also includes new revenue, distribution, and marginal tax rate estimates.
On top of the $1.4 trillion in the first decade, the report found that Clinton's proposals would increase federal revenue an additional $2.7 trillion over years 11to-20 of implementation. The plan would decrease the debt by $1.6 trillion over the first 10 years when accounting for interest savings.
The majority of revenue increases under Clinton's plan would come from income tax provisions aimed at high earners, the report said. Clinton has proposed a 4% surcharge on adjusted gross income greater than $5 million, a minimum tax of 30% of gross income between $1 and$2 million, and a 28% limit on the tax benefit from specified deductions and exclusions. She has not proposed changing corporate income tax rates.
Should the 28% cap on deductions and exclusions include municipal bonds, Frank Shafroth, the director of the Center for State and Local Government Leadership at George Mason University, said he anticipated an "all-out war" similar to one three decades ago after Ronald Reagan proposed eliminating the tax-exempt standing of certain muni bonds for public purposes.
Still, he said that Clinton's efforts to reduce the national debt and stabilize interest rates would be "awfully valuable."
The 4% surtax would create a $140 billion revenue increase over a 10-year period, the report found, while the 28% cap on certain deductions and exclusions would create $520 billion in revenue and the 30% minimum tax would create $124 billion.
"Marginal tax rates would increase for high-income filers, reducing incentives to work, save, and invest, and the tax code would become more complex," analysts said in the report.
When accounting for added interest costs, Trump's plan would add $7.2 trillion to the federal debt by 2026 and $20.9 trillion by 2036, TPC said. His plan would reduce federal revenue by $6.2 trillion over the first decade of implementation and by an additional $8.9 trillion in the second decade, the organization added.
TPC said three-fourths of the revenue loss would come from reductions in business taxes.
Shafroth said the projected rise in debt under Trump's plan could spell bad news for munis.
"The cost of infrastructure for states, cities, and counties under Trump would skyrocket because interest rates would have to go up because Trump's budget would increase the nearly unsustainable long-term national debt," Shafroth said. "Obviously U.S. Treasury securities would experience higher interest rates immediately. I can't even begin to think what it would think it would do to infrastructure."
Trump's revised plan, marked by significantly reduced marginal tax rates and increased standard deduction amounts, would repeal personal exemptions and cap itemized deductions. It would reduce the current individual income tax brackets to three from seven with a 33% top rate. It would also reduce the corporate rate to 15% from 35%. The report includes proposals from three Trump speeches between Aug. 8 and Sept. 15 that outlined his revised tax plan, which would reduce tax rates, simplify many provisions and overhaul business taxation.
Still, TPC analysts said that Trump's current plan "leaves many important details unspecified, requiring them to make many assumptions to analyze the proposal.
TPC said it will update the report with estimates that include macroeconomic feedback effects.
In a statement released Tuesday, the Trump campaign called the report a "fraudulent analysis," and cited a "software bug" TPC admitted to that may have prevented it from properly scoring his plan's economic effects.
"The TPC was privately informed they had modeled the wrong plan –not ours—but refused to correct their extremely embarrassing error and model our plan," said Stephen Miller, policy adviser to Trump.
The Clinton campaign also issued its own statement Tuesday in response to the TPC report, in which it said that Trump's plan would worsen the existing carried interest loophole that allows the wealthiest earners to pay a lower rate than many middle-class taxpayers.
"Donald Trump's plan is the most extreme form of trickle-down economics: adding more than $20 trillion to the debt over the next two decades by providing massive giveaways to the richest Americans, said Clinton senior policy advisor Jacob Leibenluft.
The TPC analysis follows a report released last month by the Committee for a Responsible Budget, which estimated that Trump's plan would add $5.3 trillion to the debt over the next decade, while Clinton's would add $200 billion over the same period.
