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Fisher Investments on the Presidential Debate

In the opening presidential debate of 2016, the candidate’s economic discussions skewed towards taxation issues. Both Hillary Clinton and Donald Trump had their own versions of what they would do to improve the economy by optimizing the tax system. Although their representation of the tax issues in this country differ, both state that their policy proposals will assure prosperity in America. Here are how some of the taxation issues were explored during the debate.

What’s a VAT?

VAT, which is the acronym of Value Added Tax, was Trump’s focal point as a reason for the trade imbalance with Mexico. In an allegation that America is being “ripped off,” he stated that the VAT tax is 16 percent to Mexico and zero percent to the United States. While the VAT tax is 16 percent in Mexico, that applies to the purchase of both imports and domestic goods. The United States is not paying 16 percent to export goods into Mexico. Forbes as well as other news outlets noted Trump’s inaccuracy.

Many Happy Returns?

Despite the tradition in modern times for candidates to release their tax returns, Trump has not as of yet. Clinton made this an issue at the debate, wondering, “you’ve got to ask yourself, why won’t he release his tax returns? … maybe he’s not as rich as he says he is… maybe he’s not as charitable as he claims to be.”

Clinton then continued on to the point of her pondering, the fact that existing reports from several tax seasons ago show that Trump paid no federal tax for those time periods. ”Or maybe he doesn’t want the American people, all of you watching tonight, to know that he’s paid nothing in federal taxes,” she concluded. Trump’s reply “That makes me smart” may become a campaign phrase that he will regret.

Image source Wikimedia

Image source Wikimedia

She Said, He Said

One of the chief debating points when talking about economics is about how much to tax the wealthy. During the debate Clinton stated, “Slashing taxes on the wealthy hasn’t worked and a lot of really smart, wealthy people know that… I think building the middle-class, investing in the middle class, making college debt-free so more young people can get their education, helping people refinance their debt from college at a lower rate, those are the kinds of things that will really boost the economy.” She aims to do this by taxing corporations and the ultra-wealthy.

In reply Trump answered. “Typical politician. All talk no action. Sounds good. Doesn’t work. Never going to happen. Our country is suffering because people like Secretary Clinton have made such bad decisions in terms of our jobs and in terms of what is going on. Now look, we have the worst revival of an economy since the Great Depression.” Trump’s tax plan will reduce the income tax brackets from seven to three, which are twelve, twenty-five, and thirty-three percent.

Each candidate has promoted tax deductions in their economic platforms. Clinton looks more favorably upon small businesses than large corporations and has proposed a new standard tax deduction for them. She also wants to give start-ups additional tax breaks. Trump wants to give a childcare tax deduction to help families out.

A Financial Response

So how does this affect the stock market and investments? According to Fisher Investments on the Presidential Debate, what each candidate says may not actually be what happens. It is best not to drastically change your investment plans for fear of what a political candidate says they will do. Remember George H. W. Bush’s “no new taxes” statement? While the president is the leader of the country, there are checks and balances in our governmental system and the winning candidate will have to work with Congress in order to pass legislation. There may be short-term market fluctuations, but long term, the stock market doesn’t care who’s in office.

State of the Estates

Clinton’s most recent tax policy creates three new tax brackets for large estates. The tax rates would be 50 percent for estates above $10 million dollars per person, 55 percent for estates over $50 million dollars per person, and 65 percent for estates over $500 million dollars per person.

In contrast, Trump wants to do away with the estate tax completely.

Both candidates have sectors of America that they want to increase taxation of, and demographic groups that they want to help out with tax cuts. The aspect of who to tax more or less comes up every election year. Will the economy be affected? Probably in the short term. But in this turbulent election cycle, it’s wise to remember when planning your long-term financial future to not lose sight of your individual financial goals.