Democratic presidential hopeful Hillary Clinton would raise taxes on businesses and high-income households while making minimal changes to the after-tax incomes of those with low and moderate incomes, according to a new analysis by the Tax Policy Center. Overall, Clinton would boost federal revenues by $1.1 trillion over the next decade. Those changes would make the tax code more complex, especially for high-income households, and would reduce incentives to work, save, and invest.
Clinton would retain the basic structure of the current income tax, in contrast to GOP presidential candidates Marco Rubio and Ted Cruz, who would shift to a consumption-based tax. According to TPC’s analysis, Clinton’s proposal roughly achieves her goal of raising taxes only for those making more than $250,000, though how closely she hews to her promise depends on how she defines income.
Tax changes
Clinton’s tax plan increases taxes on the wealthy to pay for the middle-income kitchen table social programs she’s been promoting, such as help with college and medical costs. And by raising taxes by $1 trillion, her plan could modestly reduce the projected federal debt over the next decade—unless she spends the money on the additional middle-income tax cuts she’s promising.
On average, households would pay about $650 more in taxes in 2017 under Clinton’s proposal, a 0.9 cut in after-tax income. By TPC’s measure of cash income, which is broader than commonly used measures such as Adjusted Gross Income, those making less than about $80,000 would face very small tax hikes, averaging between $4 and $44.
Those tax increases are not due to direct tax increases on individuals. Rather they represent their share of her proposed tax increases on businesses. TPC estimates that shareholders bear 60 percent of the corporate tax, all capital owners bear 20 percent, and workers bear 20 percent.
Households making $143,000 to $296,000 would pay no more than a few hundred dollars in extra tax on average.
However, the highest-income 1 percent would face an average tax increase of about $78,000, a 5 percent reduction in their after-tax income, while the top 0.1 percent would pay $520,000 more, 7.6 percent of their after-tax income. Overall, more than three-quarters of Clinton’s tax increase would hit the top 1 percent (who make more than $732,000). The highest-income 0.1 percent of filers (who make more than $3.8 million) would pay more than half of her tax increase.
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