What Your Taxes Could Look Like Under a Trump or Harris Presidency

As we’re getting close to the final stretch of the 2024 presidential election, there’s been more attention on the tax policies proposed by the two candidates.

Vice President Kamala Harris and former President Donald Trump have mostly outlined their plans for the economy and taxes. What stands out is that each candidate offers widely contrasting economic and tax agendas. These policies under either a Trump or Harris administration are sure to have significant implications for taxpayers, and especially for high income earners.

In this post, we’ll be focusing on each candidate’s proposed policies in two key areas: taxes and the fee schedule. It isn’t meant to provide opinions on either candidate or political party.

Overview of Candidates’ Positions

Kamala Harris

Vice President Kamala Harris, has mostly aligned herself with President Biden’s fiscal policies, including Biden’s proposed Fiscal Year 2025 budget and tax plans. 

Harris supports a more progressive tax system which would increase the tax burden on high-income earners and corporations. Here’s a breakdown of her key proposals:

• Individual Income Taxes: Harris supports increasing taxes on individuals earning over $400,000 annually. This includes higher marginal tax rates for top earners, which would impact many high income professionals such as physicians.
• Corporate Taxes: Harris advocates for increasing the corporate tax rate from the current rate of 21% to 28%. This would reverse part of the corporate tax cuts enacted under the Trump administration with the Tax Cuts and Jobs Act (TCJA) of 2017.
• Capital Gains Taxes: Currently, the highest federal long-term capital gains tax rate is 20%. Harris supports raising the capital gains tax rate to 44.6% for high-income earners. Based on this proposed higher tax rate, when combined with state taxes, this 44.6% rate would mean a capital gains tax of over 50%. 

For example, California has a top marginal income tax rate of 13.3% which applies to capital gains income. 

• Wealth Tax and Minimum Tax on Unrealized Gains: Harris proposes a minimum tax of 25% on unrealized gains for individuals with wealth exceeding $100 million. This tax would be based on the total income, including a tax on unrealized capital gains. In essence, this tax would apply to the increase in value of your assets even if you haven’t sold them.
• Carried Interest Tax: Harris aims to tax carried interest as ordinary income for individuals earning over $400,000. This targets investment fund managers who currently benefit from lower capital gains tax rates on carried interest income.
• Removal of Stepped-Up Basis: Harris’s plan includes eliminating the stepped-up basis at death. This proposal would impose a capital gains tax on inherited assets, which would create a so-called “second death tax.” This means that heirs would face capital gains taxes on the appreciation of assets from the time of inheritance.
• Stock Buyback Tax: Harris has proposed increasing the excise tax on corporate stock buybacks from the current 1% to a 4% rate. The intention is to discourage companies from repurchasing their stock instead of investing in growth.
• Harris has proposed a plan to expand and enhance the Child Tax Credit (CTC) that was part of the American Rescue Plan (ARP) passed in 2021. The ARP temporarily:
  

– Increased the CTC amount to $3,000 per child aged 6-17 and $3,600 per child under 6.

– Made the credit fully refundable so low-income families could receive the full amount.

– Allowed families to receive the credit in monthly installments rather than a lump sum.

• Harris wants to make these CTC expansions permanent, rather than having them expire after 2025 as currently scheduled under the ARP. On top of restoring the ARP’s CTC expansion, Harris’ plan would create a new $6,000 tax credit for the first year of a child’s life. This proposed credit would be available to middle and low-income families to help cover expenses like cribs, diapers, car seats, and other costs of caring for a newborn.
• $25,000 First-Time Homeowner Credit: This credit would provide working families who have paid their rent on time for two years and are buying their first home up to $25,000 in down payment assistance, with more generous support for first-generation homeowners.
• Earned Income Tax (EIC) Credit: Currently, the IRS has a maximum tax credit of $632 for families making less than $25,000 with no dependents. Harris’ proposed plan will expand the EIC to cover individuals in lower-income jobs with no children, cutting their taxes by up to $1,500.
• Health Tax Credit: Currently, the IRS has the “Premium Tax Credit”, a credit that helps individuals cover the premiums for their insurance purchased through the ACA Marketplace. Harris’ plan would extend the credit, which is set to expire at the end of 2025.
• Tax incentive for building starter homes: The Harris Administration proposed a tax incentive for homebuilders who build starter homes sold to first-time homebuyers. 
• Housing Incentive: currently, the IRS provides Low Income Housing Tax Credit (LIHTC) for developers to subsidize the construction of housing for lower income tenants. Harris proposes to expand the existing tax incentive for businesses that build affordable rental housing. 

Donald Trump

Former President Donald Trump is known for his tax-cutting agenda, primarily through the Tax Cuts and Jobs Act (TCJA) of 2017. 

Trump’s tax proposals for his potential second term involve building on the TCJA by making individual tax cuts permanent and introducing additional tax cuts and business incentives. 

Here’s a breakdown of his proposed tax agenda:

• Individual Income Taxes: Trump has proposed making the individual tax cuts introduced in the TCJA permanent. These cuts are set to expire after 2025 and include reduced marginal tax rates across income brackets, doubling the standard deduction, and capping state and local tax (SALT) deductions.
• Corporate Taxes: Trump is likely to maintain the reduced corporate tax rate of 21%, which was lowered from 35% under the TCJA. This policy has been a key part of his economic agenda intending to make the U.S. more competitive globally.
• Capital Gains Taxes: Trump has expressed interest in reducing capital gains taxes further, potentially lowering the top rate from the current 20% to 15%. This would primarily benefit high-income earners and investors, including people with significant investment portfolios and real estate holdings.
• In addition to lowering the capital gains tax rate, Trump’s proposal includes repealing the 3.8% Net Investment Income Tax.
• Business Incentives: Trump has stated that his economic policies focus on reducing regulatory burdens and offering incentives for businesses to invest and grow. This could include further tax deductions for business expenses and capital investments.
• Tariffs: During his first term as president, Trump made tariffs a central piece of his economic strategy. His administration imposed tariffs on a wide range of imports, most notably from China, For his potential second term, Trump indicated that he would continue to use tariffs as a key tool in his economic and trade policies. 

Proposed Tax Policies’ Impact on Physicians

It’s apparent that Harris and Trump each offer widely contrasting tax policies. This is particularly important for physicians in high-income brackets who could face greatly different tax liabilities depending on who wins the presidency.

Kamala Harris

• Higher Individual Income Taxes: If you’re a physician earning over $400,000 annually, you’d likely see an increase in your income tax rates under Harris’s tax plan. The higher marginal rates would reduce your take-home pay, affecting lifestyle, savings, and investment decisions.
• Higher Capital Gains and Wealth Taxes: If you’re a physician with substantial investment income or have wealth exceeding $100 million, Harris’s proposed wealth tax, increased capital gains taxes, and unrealized capital gains will likely mean higher tax bills.
• Changes to Deductions and Credits: Harris’s tax plan may also include changes to deductions and credits. For example, if the SALT deduction cap is adjusted or if new limits on itemized deductions are introduced, high earners in states with high income taxes could see their tax bills increase.
• Harris has proposed to relieve the medical debt of millions of Americans by using public funds. This would also include preventing the accumulation of new debt. The aim is to help patients with medical debt in seeking medical treatment and expand healthcare coverage. If enacted, this could lead to increased patient volumes for physicians. 

Donald Trump

• Corporate Tax Reduction: Trump’s proposed corporate tax reductions could benefit physicians who own their practices. Lower corporate tax rates would overall reduce taxes on business income. This would likely mean higher profits and the ability to reinvest in their practices.
• Capital Gains Tax Reduction: Trump’s proposal to reduce the capital gains tax rate would likely benefit high earners as lower tax rates on capital gains would increase after-tax returns on investments.
• Investment Income and Business Tax Incentives: Trump’s policies would likely continue to favor investment income and provide tax incentives for business related expenses. For physicians who own a private practice, these incentives could lower their taxes.
• Many medical supplies used in the U.S., such as surgical instruments, personal protective equipment (PPE), and diagnostic devices, are imported. If tariffs are applied to these goods, the cost of importing them rises. Also, many pharmaceuticals or their raw materials are sourced from abroad from countries like China and India. Tariffs on these imports could increase the cost of producing or purchasing these drugs, leading to higher prices for patients and healthcare providers.

The Physician Fee Schedule

The tax policies of Harris and Trump go beyond individual and corporate taxes. Both candidates have proposed changes that could influence the healthcare landscape, including how physicians are compensated.

Kamala Harris

Harris’ healthcare proposals align closely with President Biden’s agenda, which aims to support the Affordable Care Act (ACA). The Biden administration has enacted several ACA focused policies, including renewing premium subsidies, opening special enrollment periods, encouraging Medicaid expansion, and fixing the “family glitch” that left some families without affordable coverage.

During her 2020 presidential campaign, Harris co-sponsored Senator Bernie Sanders’ “Medicare for All” bill, which would have ended private health insurance and replaced it with a single government-run insurer.

Since then, Harris’ approach has been revised and would allow for private insurers to participate in the healthcare system. This would involve private plans adhering to strict Medicare requirements, with the goal of having a regulated environment that ensures cost and quality standards are met.

Harris has outlined several healthcare proposals that could impact physicians, especially those who own their own practices.

Harris supports expanding access to healthcare and moving toward value-based payment models. Under her plan, physicians might see a shift away from traditional fee-for-service models and instead, toward payments based on patient outcomes.

This plan could improve patient care, but it also means that physicians might have to change their practice models and compensation structures.

Also, based on Harris’ proposals, physicians could see changes in how they are reimbursed by Medicare and other insurers. For instance, her plan would emphasize value-based care which could lead to more performance based incentives. This could increase administrative costs and require investments in technology and care coordination.

These proposals might provide more stable and potentially higher reimbursement rates for physicians, especially those with Medicare patients. However, the increased regulation and potential standardization of fees might limit the ability of some physicians to set prices based on market demand.

Donald Trump

Trump’s approach to healthcare has emphasized maintaining traditional fee-for-service models. Under this model, physicians are compensated based on the volume of services provided, which some physicians prefer for its simplicity and predictability. 

Critics argue that the fee-for-service model can incentivize unnecessary services and increased costs, as providers are paid more for doing more, regardless of the outcome. 

Trump wasn’t able to repeal the Affordable Care Act (ACA) during his presidency, but his administration implemented some changes to the law. Additionally, his administration expanded short-term insurance plans that often did not cover preexisting conditions.

In his current election campaign, Trump has promised to attempt to repeal and replace the ACA again, although he frames it as creating a “much better health care” plan rather than using the terms “repeal” or “replace.

While the Trump administration didn’t provide a comprehensive replacement plan for the ACA, his budget proposals suggested converting the ACA into a block grant for states, capping federal Medicaid funding, and allowing states to ease protections for those with preexisting conditions. 

Under the Biden administration, the ACA Marketplace has had record enrollment and historically low uninsured rates. However the enhanced premium subsidies are set to expire at the end of 2025, so the next presidential administration will be in a position to extend these subsidies.

Trump has advocated for reducing regulatory burdens on healthcare providers, which could include changes to the Medicare fee schedule. The Centers for Medicare & Medicaid Services (CMS) has reported a reduction in improper payments, estimating a decline of $15 billion since 2016. 

Finally, during his first term, Trump supported the expansion of telemedicine services in response to the COVID-19 pandemic. 

Final Thoughts

The tax policies proposed by Kamala Harris and Donald Trump reflect starkly different approaches. 

Analysts have estimated that the differences in their tax plans could result in a gap of approximately $6 trillion over a decade. This gap is largely tied to differing approaches to taxation for corporations and individuals earning over $400,000 annually.

Harris’s approach focuses on increasing taxes for high-income earners and corporations to fund social programs, while Trump advocates for maintaining lower tax rates to stimulate economic growth.

Under a Kamala Harris presidency, many physicians could be facing higher taxes on income, investments, and wealth, along with changes to the healthcare reimbursement landscape. These new policies may mean that you may need to make adjustments to your personal investment strategies, as well as to your practice.

A second Trump presidency would likely focus on maintaining and expanding the tax cuts introduced during his first term. Lower taxes and continued business incentives could create a less restrictive financial environment for physicians, especially for those with significant investments or physicians with their practices.

Although, Trump has yet to provide more details on his replacement plan for the ACA. 

Keep in mind that any proposals would need to pass through Congress and there’s likely to be one big tax bill in 2025 regardless of who’s in the White House. 

Overall, high earners should stay informed and consider how any new policies will impact their finances in the coming years.