Every four years our country is consumed by political jargon, ads, and candidates looking to make their mark. And candidates on both sides of the aisle are looking to garner support through your personal finances.
The reality is that many Americans vote with their bank accounts. And, this year you should be watching your top line, and not charged political ads.
Presidential elections bring uncertainty to the financial markets. You may be one of the many Americans wondering how this year’s election cycle will impact your personal finances. So, what are the keys to consider?
Student loans, small business, and taxes are all key issues to watch during the 2016 Presidential race. Each candidate brings unique plans and views to the table. And you, and your wallet, should be watching.
Student Loan Reform
As candidates look to tap into the Millennial vote, student loan debt has become a key consideration. Today, there are more than 43 million Americans holding a whopping $1.2 trillion in student debt. Student loan debt is affecting seven out of 10 graduates, and the problem is only getting worse.
Hillary Clinton, Bernie Sanders, Marco Rubio, and others have already vocalized programs to solve the $1.2 trillion student loan crisis in the United States.
Hillary Clinton’s plan, New College Compact, would make public colleges accessible without student debt. In addition, current student loan borrowers would be able to refinance federal student loans to current market interest rates. Clinton reports that the average student loan borrower would save about $2,000 through federal student loan refinancing. Furthermore, all borrowers would be eligible to enroll in a simplified income based repayment program that limits monthly repayment to 10 percent of income.
Bernie Sanders is aiming to make America college-tuition free and debt free. In a February 2016 poll, Sanders was ranked as the number one candidate by current student loan borrowers. Sanders unveiled six steps to make college debt free. In short, Sanders is looking to make all public colleges tuition free. Sanders would stop the federal government from making a profit on student debt, in part by substantially cutting student loan interest rates. The programs would be paid for by increasing taxes on Wall Street.
Marco Rubio has previously introduced legislation to help student loan borrowers. Rubio’s Dynamic Repayment Act would have enrolled all federal student loan borrowers into a program where they paid 10 percent of earnings each month toward student loan repayment, with a $10,000 annual exemption. The U.S. government would take the money directly from workers’ paychecks. Borrowers would also have the option to opt out and prepay their loans without penalty, if they preferred. The bill went on to outline a plan that would forgive up to $57,500 of loans after 20 years, and loans greater than that amount would be forgiven after 30 years.
There are several key financial issues for small business owners this election season. The Affordable Care Act, minimum wage, and anti-union sentiment “right to work” legislation is at the forefront. All of these financial issues are divided along the aisle.
Each candidate makes the argument that he or she is the best candidate for small business. But who is saying what?
In last August’s Manta Poll of small business owners, respondents reported that Donald Trump is the strongest contender overall. Trump won 38 percent of small business support, ahead of Hillary Clinton (17 percent), and Marco Rubio (six percent).
Late last year, Hillary Clinton released her four-point plan for stimulating small business. Clinton is proposing to raise the federal minimum wage to $12/hr. On the flip side, Clinton plans to reduce taxes on small business.
Marco Rubio would “repeal and replace” the Affordable Care Act while reforming the tax code for small business.
Bernie Sanders has previously supported the Small Business Jobs Act, which granted small businesses access to low interest loans, and provided $12 billion in small business tax relief during the 2008 financial crisis. In contrast, Sanders has vocally supported a $15 federal minimum wage.
Ted Cruz plans to lower small business taxes, decrease regulation, and promote “growth and innovation”. Cruz is widely remembered for his 2013 proposal to abolish the IRS and implement a flat tax.
Taxes, Taxes, Taxes
Taxes are a key issue each and every election cycle. For most of us, taxes is the single most important personal finance issue.
Hillary Clinton has been very vocal in her support of higher taxes. In December of last year, the Washington Times reported that Clinton said that she wants to “tax the wealthy at even higher rates than those proposed by the Obama administration.” In January, Clinton went on to say that she would push for a four percent tax increase on Americans making more than $5 million per year.
Clinton vocalized her distaste for corporate tax evasion, saying, “I will do everything I can to prevent this from happening, because I don’t want to see companies that thrive, use the tax code, the gimmicks, the shenanigans…to evade their responsibility to support our country.”
According to the Tax Policy Center, Donald Trump’s tax proposal would “cut taxes at all income levels, although the largest benefits, in dollar and percentage terms, would go to the highest-income households.
The plan would reduce federal revenues by $9.5 trillion over its first decade before accounting for added interest costs or considering macroeconomic feedback effects. The plan would improve incentives to work, save and invest. However, unless it is accompanied by very large spending cuts, it could increase the national debt by nearly 80 percent of gross domestic product by 2036, offsetting some or all of the incentive effects of the tax cuts.”
Bernie Sanders proposed a tax plan that would increase both individual and corporate taxes. In short:
- 6.2 percent income-based health care premium paid by employers
- 2.2 percent income-based health care premium paid by households
- 37 percent taxes on income between $250,000 and $500,000
- 43 percent taxes on income between $500,000 and $2,000,000
- 48 percent taxes on income between $2,000,000 and $10,000,000
- 52 percent taxes on income above $10,000,000
Ted Cruz’s tax plan is a little simpler. Cruz proposed a 10 percent flat tax on all individual income from wages. Cruz went on to propose a flat 16 percent business tax, replacing both payroll and corporate income taxes.
Marco Rubio announced a proposed an 80 percent decrease in gas taxes. Moreover, Rubio would reduce the number of tax brackets from seven to three: 15 percent, 25 percent and 35 percent. Rubio would eliminate most exemptions and deductions, and instead give taxpayers a personal tax credit which phases out for higher earning Americans.
Rubio’s plan would also eliminate the double-taxation on savings and investment income which would effectively move capital gains taxes to zero percent. Business taxes would be capped at 25 percent.