Hillary Clinton’s overall economic goal appears to be to redistribute the wealth in America. On a microeconomic level, her plan is willing to sacrifice some overall economic efficiency for more economic equality. So how does her plan intend to redistribute the wealth?
First, her plan increases taxes significantly on the wealthy. Primarily, her plan targets the current income tax rates. The share of income earned by the top 10% of taxpayers would experience an after-tax income 0.7% lower than in previous years while the top 1% of taxpayers would see an after-tax income 1.7% lower than in previous years. In addition, her plan hopes to implement what has become known as the “Buffett rule”. Essentially, this means that all people with an adjusted gross income over $1 million would pay a minimum of 30% in taxes. On top of that, those with an income over $5 million would be required to pay a 4% surtax, or an additional tax on top of the rate they were already paying. Out of all the additional taxes Clinton’s tax plan imposes, 75% of them fall on the shoulders of the top 1% of taxpayers. Clinton claims that no taxes would be increased on the taxpayers earning less than $250,000/year.
Additionally, Clinton’s tax plan targets investors on Wall Street. Perhaps the most prominent political symbol of the plan closes what is known as the “carried interest loophole”. This loophole allows hedge fund managers to pay income taxes at a discounted rate. However, closing this loophole only affects a very small minority of the population and generates little revenue. Her plan’s other proposal- raising the short term capital gains tax rate from 20% to between 27.8% and 47.4%- actually reduces overall capital gains tax revenue. Instead, it increases the incentive to wait longer to realize capital gains and discourages speculative investments.
Overall, Clinton’s tax plan would decrease the federal deficit by increasing tax revenue by $498 billion over the next decade. However, the actual tax revenue increase would be closer to $191 billion due to the lost economic output caused by increased marginal tax rates on labor and capital. This lost economic output roughly would translate to a reduction in the GDP by 1% over the next decade.
Unlike her opponent’s tax plan, Clinton’s tax plan focuses on a more equitable economy rather than a more efficient economy. Strictly in regards to economic policy, voters should examine which candidate’s tax plan embodies the majority of their ideals and weigh that accordingly with the other issues that contribute to making an informed vote.