Like in most elections, taxes play a major role in the campaign policies set forth by the presidential candidates. This year, tax policy may play a more pivotal part of any economic recovery.

While it’s impossible to know exactly what future tax policy will look like, the plans set forth by President Trump and former Vice President Joe Biden give us insight as to how they expect to shape tax policy if they win the election. Here’s what we know so far.

Trump’s Tax Plan

In 2016, Trump’s campaign plan included significant tax cuts. Those tax cuts came to fruition with the Tax Cuts and Jobs Act of 2017 (TCJA). Most of the provisions within the law are set to expire after 2025. But with a 2020 campaign win, we might just see some of those tax cuts extended or made permanent.

The Trump campaign hasn’t released a full tax plan for the next four years, but he has signaled to voters that we can expect to see him push for additional tax cuts.

There were a few specific tax changes published as a part of his campaign agenda. Included in this is expanding Opportunity Zones. Taxpayers can defer capital gains from the sale of a business or personal property if they reinvest the proceeds in a Qualified Opportunity Fund. These funds are then invested in economically distressed communities.

Details for how Opportunity Zone investment might be expanded isn’t clear, but one option would be to extend the December 31, 2026 deferral period.

Business owners should also expect to see some new tax policies aimed their way. Trump’s published agenda is light on details but includes:

  • Made in America Tax Credit
  • Tax Credits for companies that bring back jobs from China
  • Tax cuts to keep jobs in America

While Trump had previously floated the idea of making payroll tax cuts permanent, that’s not currently part of his campaign agenda.

Biden’s Tax Plan

While with a Trump tax plan we are likely to see him double down on many of the tax cuts made in 2017, Biden’s tax plan seems to focus on other areas. From the details released as part of Biden’s 2020 campaign, changes to both business and individual taxes are included in the plan.

Business tax proposed changes include:

  • Raise the corporate tax rate to 28%: Under the TCJA the corporate tax rate was decreased to 21%. Before the TCJA, the top corporate tax rate was 35%.
  • Impose a 15% minimum income tax on book income: Companies with $100 million or more of net income would be required to pay at least 15% federal tax on their book income, rather than their taxable income.
  • Offshoring tax penalty: US companies that produce goods overseas for sale back in the US will be subject to a 10% tax penalty on the related profits.
  • Made in America tax credit: A 10% tax credit for companies that make certain investments to create jobs, like revitalizing closed facilities. Additional Made in America tax policies can be found in the full plan writeup.

Individual tax proposed changes include:

  • Raise the top individual income rate bracket: The top current individual income tax rate is 37%, set by the TCJA. Biden’s tax plan has that reverting to the pre-TCJA rate of 39.6% for people earning over $400,000.
  • Increase the capital gains tax rate: For income over $1 million, long-term capital gains and qualified dividends will be taxed at the ordinary income tax rate.
  • Qualified Business Income (QBI) Phase-out: The QBI (section 199A) will be phased out for those earning above $400,000 in taxable income.
  • Additional social security tax: Additional payroll tax of 12.4% will be assessed on income over $400,000. The tax will be evenly split between employees and employers. This creates a ‘donut hole’ in the tax where wages between the current wage cap of $137,700 and $400,000 would not be taxed.
  • First-Time Homebuyers’ Tax Credit: Provide a homebuyers’ tax credit of $15,000 for first-time homebuyers, a credit that was last used during the Great Recession.
  • Increase and expand the Child Tax Credit: A temporary increase and expansion of the Child Tax Credit from $2,000 to $3,000 for children age 6 to 17. For children under six, the credit will be $3,600. The tax credit will be made fully refundable.
  • Increase the Child and Dependent Care Tax Credit: Increases the tax credit from a maximum of $3,000 in expenses to a maximum of $8,000 in expenses.
  • Cap itemized deductions: For people earning over $400,000, itemized deductions will be capped to 28%.

Tax Reform Needs Congressional Approval

While there are likely tax changes on the horizon after the election, especially with many of the provisions from the TCJA set to expire after 2025, the decision to change taxes isn’t left to the sole discretion of the president.

The legislation begins the process of becoming law in Congress in the House Ways and Means Committee. From there it needs to be approved by Congress, the Senate Finance Committee, and the Senate. Any compromises would then need to be approved again by both the House and Senate for approval.

After that approval, the bill can be passed by Congress and sent to the President to sign into law.

Because of this process, it is likely that both Trump and Biden would struggle to enact tax policy as proposed and would need to engage in bipartisan negotiations to pass new legislation. So, while we may speculate about what’s to come after the election, we won’t know what changes will be made to the tax law until our lawmakers hit the negotiation table.