TAXES, WAGES, AND CHILD CARE, OH MY!
When running for president, candidates make lofty promises about the things they'll accomplish if elected. Our system of government intentionally makes it difficult for presidents to accomplish much on their own, but every president can directly affect the day-to-day finances of ordinary Americans. Come January, Donald Trump will be the next president. Here are some of the presidential ambitions that could have a real impact on your finances in a Trump presidency.
INCOME TAX BRACKETS
Americans pay federal income tax through a progressive system that groups taxpayers into income-based brackets. Those who earn more pay a higher percentage. Currently there are seven tax brackets ranging from 10 percent to 39.6 percent. Taxpayers in all but two brackets pay at least 25 percent of their income in federal taxes. If elected president, Trump vows to simplify the code to just three brackets (for married, joint filers), which would lower the tax burden for most citizens. Those who make less than $75,000 would pay 12 percent in taxes. Those who earn between $75,000 and $225,000 would pay 25 percent. Households with income greater than $225,000 would pay 33 percent.
CHILD CARE EXPENSES
Trump vows to rewrite the tax code so that parents can deduct the cost of child care for up to four children (as well as elderly dependents) from federal income taxes. He also proposes allowing parents to open tax-free, IRA-style savings accounts dedicated to child care. Not only does the businessman propose six weeks of paid leave for new mothers, but he also wants to give a child-care rebate to low-income taxpayers, along with a $500 matching contribution to their savings accounts. Currently, residents of all but 13 states pay more than 10 percent of income on child care expenses. In states where care is costliest, some single parents and people living near the poverty line dedicate more than 75 percent of their income to child care.
Trump has been inconsistent on whether or not he favors an increase in interest rates, which are near historic lows. The Federal Reserve sets federal funds rate targets and controls monetary policy. The Fed's current chair, Janet Yellen, has repeatedly fallen in and out of favor with Trump over the course of the campaign. As president, he could replace her in 2018 with someone who shares his currentviews on interest rates. Consumers are directly affected when the Fed raises interest rates. It becomes more expensive to borrow money for things like mortgages or auto loans but also leads to better earnings from financial vehicles like bonds and savings accounts.
Americans who are fortunate enough to receive a large inheritance after the death of a loved one must pay taxes on it. Those who oppose the tax refer to it as a "death tax." People who believe wealthy heirs should pay a tax call it an estate tax. Either way, Trump says it should go. He would, however, make an exemption for capital gains held until death and valued at more than $10 million. He would also close a common loophole that allows the estate to go to charities set up by the heirs. In most cases, however, if your rich uncle dies and he loved you the best, you'd get to keep your whole inheritance under President Trump.
Nearly 6 in 10 Americans are paid by the hour, and 870,000 of those hourly workers earn minimum wage, which is currently $7.25 an hour. Any increase would give those people an immediate pay raise. Trump has broken with the GOP by saying he supports increasing the minimum wage to $10 an hour. That would give a raise to 15 million Americans who currently earn less than $10 an hour.
The Obama administration's signature piece of legislation was the Affordable Care Act, commonly known as Obamacare. Trump wants Congress to completely repeal the ACA and replace it with health savings accounts. It's difficult to quantify how much money an individual would lose or gain, due to the many variables involved. One thing is almost certain, however: Your taxes, premiums, and overall health care costs will change, whether the law is repealed or expanded.