What would a Republican president mean for your money? It’s a simple question without a simple answer.
GOP candidates run on popular issues like tax cuts and shrinking government size, but, as with all politics, the devil is in the details. While the economic proposals put forth by frontrunners have many similarities, there are some key differences, too. (Democratic candidates have their own opinions, too.)
It’s important to remember, however, that presidents can’t unilaterally impose their campaign ideas on the country, and many of them disappear on inauguration day. Still, candidates’ stated policies offer a real glimpse into the priorities they could set while governing—and that will almost certainly matter to your money.
Personal Income Taxes
All major Republican candidates have proposed tax cuts and simplification of the tax code—mainly reducing the number of tax brackets and deductions. Iowa caucus runner-up Donald Trump, for example, wants to shrink the current seven tax brackets to four–0, 10, 20 and 25 percent. He says individuals making under $25,000 and families making under $50,000 would pay no income tax.
Jeb Bush, John Kasich and Marco Rubio call for three tax brackets. Bush would limit them to 10, 25, and 28 percent–and would allow taxpayers to take bigger standard deductions (which lower the taxes you owe). Rubio proposed 15, 25 and 35 percent and says he would create a new Child Tax Credit of up to $2,500 per child (versus the $1,000 credit now). Kasich would increase the Earned Income Tax Credit by 10 percent, which would provide some relief to low-income workers. Chris Christie promises “a flatter, fairer and simpler individual income tax system” on his campaign site, but does not offer specific details.
On the other hand, Carly Fiorina calls for a “low” flat tax, as does Iowa caucus winner Ted Cruz, who proposes everyone pay a flat tax of 10 percent of their income. (For a family of four, the first $36,000 would be tax-free.) Rand Paul would support a 14.5 percent flat tax and Ben Carson would support a flat tax of 14.9 percent, though the tax would apply only to income above 150 percent of the Federal Poverty Level.
Economists will debate the real-world impact of tax cuts until the end of time, but generally, GOP hopefuls claim growth resulting from lower taxes would make up for any revenue shortfall.
Depending on the details of any tax cut that manages to pass through Congress and your current tax bracket, you could see more money in your paycheck. But if the cuts make it tougher for the government to pay its bills and leads to higher deficits, that could trigger higher interest rates and even inflation—which would make the money you have worth less.
Corporate Income Taxes
Equally as important, GOP candidates promise to lower corporate income taxes, claiming that would help corporations and improve the job market. Rubio and Christie would cut the top corporate rate from 35 to 25 percent. Trump says he’d drop it to 15; Carson to 14.9 percent. Cruz and Paul say they’d eliminate corporate income taxes altogether and replace them with a business-transfer tax.
Of course, whether companies pay this tax rate or move their money overseas is a big issue—one Trump takes on. His tax plan calls for U.S. firms that have stashed an estimated $2 trillion overseas to “repatriate” that money to the U.S. (meaning they’d bring the earnings back to this country and pay U.S. taxes on them) for a one-time discounted tax hit of 10 percent. Again, there’s plenty of debate about who this benefits, but in the past, repatriated funds have largely ended up in investors’ pockets, which would be good for the stock market (and probably your retirement fund), but wouldn’t necessarily spur economic activity.
The candidates’ positions on student loans include more variety than most other issues. Rubio, who once compared student borrowing to indentured servitude, introduced legislation in the Senate that would allow entities to invest directly in students, capping borrowers’ payments to a percentage of income. He also wants to tie school accreditation to student success, and his “Student Right to Know Before You Go” Act would create clearer lender disclosure of ultimate costs.
Bush recently proposed a radical overhaul that would eliminate federal student loans in favor of a $50,000 line of credit that students could draw from for school and then repay based on income. He also wants former students to be able to discharge student loans in bankruptcy, which is nearly impossible today.
Kasich said keeping college affordable is a priority and cites his efforts as governor of Ohio, where college tuition and fees will be frozen for the next two years while a state task force helps schools identify ways to cut costs. The state also pays colleges and universities based on course completion and graduation rates, not enrollment, which is unique.
Christie has called for expanding low-interest federal loans for extremely low-income students. Trump has said it’s “terrible” the government makes money off student loans, and has indicated he might support relief for borrowers, but has not released specifics. Carson has said that public universities should have to pay the interest on student loans, so students are responsible only for the principal. Cruz has talked about his personal $100,000 student loan debt, but his record is mixed: In 2013, he voted for a bipartisan bill that prevented what would have been a crippling rise in federal loan rates. The following year, he voted to block a bill that would have allowed 25 million borrowers to refinance at lower rates.
Workers and Wages
Trump has made several proposals related to American corporations and international competition. He’s said he would renegotiate the trade agreement NAFTA, and impose import tariffs. That would raise the price of cars made in Mexico, theoretically helping U.S. workers, though critics say it would spark a trade war hurting all countries involved.
Among all GOP hopefuls, only Kasich says he’ll raise the federal minimum wage.
Social Security and Retirement
On Social Security, most GOP candidates favor raising the age at which Americans can collect full benefits. (Currently, the full benefit age is 66 for people born between 1943 and 1954, and gradually rises to 67 for those born in 1960 or after.) Kasich has said he’d lower benefits for younger workers.
Christie has the boldest plan to “means test” benefits, which would reduce benefits for higher income seniors. He wants to reduce Social Security checks for seniors earning more than $80,000 from other sources, and eliminate benefits for those earning more than $200,000. (Bush and Rubio have also indicated they’re open to means-testing benefits.)
Bush has proposed what amounts to a portable 401(k) account, so workers’ retirement savings wouldn’t be tied to employers. Cruz has proposed a Universal Savings Account in which Americans could save up to $25,000 annually tax-deferred. Trump says he’ll leave Social Security and Medicare alone.
Editor’s Note: Donald Trump announced Tuesday night that he would not be participating in the debate Thursday, which will be hosted by Fox News.
January 26, 2016