In some ways, the economic plan Hillary Clinton proposed in a speech Thursday is the mirror image of the vision Donald Trump laid out earlier in the week. Clinton wants to increase taxes to pay for a hodgepodge of programs to boost low-cost education, provide paid family leave and encourage economic development.
While her blueprint is heartening advocates for workers and the poor, business groups are rankled that it doesn’t include more tax and regulatory relief that they say would spur job creation.
• Raise personal income taxes. Clinton wants to increase taxes, mostly on the wealthy, to pay for her new programs. The top 5 percent of income earners would bear 90 percent of the increased tax burden, according to the Tax Policy Center. The impact on spending and the economy is expected to be modest because wealthy individuals tend to save, rather than spend, their incremental income. Still, "it's going to hurt spending, saving and investment" to some extent, says Mark Zandi, chief economist of Moody's Analytics. It also makes the tax code more complex, he says. Although the plan would generate $1.1 trillion in additional government revenue over the next 10 years, it will be more than offset by additional spending.
• Raise certain corporate taxes. Clinton has been conspicuously silent about the corporate tax rate, which many experts say should be lowered from the current 35 percent, highest in the world, to make the U.S. more competitive. President Barack Obama has advocated cutting the rate to 28 percent and Clinton may eventually follow suit. Meanwhile, Clinton has proposed a new tax on high-frequency trading, and an "exit tax" on companies that move operations overseas. She has not addressed reducing taxes for small businesses, many of which pay the so-called "pass-through" rate based on their personal income taxes.
Trump, by contrast, has proposed lowering both corporate and small business rate to 15 percent. The National Federation of Independent Business, a small business advocacy group, says it wants to know why Clinton “rejects out of hand a lower tax rate for pass-through businesses. … Cutting their taxes means letting them reinvest in growth and jobs.”
• Crack down on trade violations. Like Trump, Clinton says she wants to crack down on China's currency manipulation and theft of U.S. intellectual property, adding she'll beef up trade enforcement. Unlike Trump, however, she's not threatening a 45 percent tariff on Chinese imports, which experts say would be met with retaliation from China that hammers U.S. exports and eliminates jobs domestically.
Rather, Clinton says she’ll impose targeted tariffs on countries that violate trade protocols. But Clinton has echoed Trump in saying she opposes the Trans-Pacific Partnership, a trade deal that she once supported and hasn’t been ratified by Congress. Gary Hufbauer, senior fellow at the Peterson Institute for International Economics, says the agreement would be a net benefit for the U.S., which has lower trade barriers than other participating nations. Economist Greg Daco of Oxford economics says Clinton’s new stance poses “the long-term growth risk of protectionism.”
• Increase infrastructure spending. Her plan would boost spending by $300 billion to upgrade the country's crumbling roads, highways, airports and waterways. That should create several million construction related jobs and lift productivity, which suffers now because goods often can't be transported efficiently. Trump also has advocated more infrastructure outlays but has been less specific.
• Raise the minimum wage. The federal minimum of $7.25 an hour would rise to $12 over several years. The move would force businesses to increase prices, hurting sales on the margins and substitute technology for labor, Daco says, adding that both would dampen hiring. Yet millions of households would benefit from higher wages, which would boost spending and job creation. Overall, employment would be a few hundred thousand jobs lower than under the status quo but incomes and living standards would be higher.
• Provide workers paid family and medical leave. It's expected to cost $300 billion over 10 years but would keep employees from leaving the workforce, making the economy more productive, Zandi says.
• Offer a tax credit for childcare expenses. Clinton's plan should be more beneficial to low- and middle-income families, which could take off the amount of their child care costs from their tax bill by up to 10 percent of their income. Trump has proposed allowing households to deduct childcare expenses, which would mostly benefit wealthier families that itemize such costs, Zandi says.
• Reduce education costs. She wants to make state and community colleges tuition-free for middle-income families and help debt-burdened graduates refinance their loans. Providing more access to education creates a better-trained workforce but the benefits to the economy may not be felt for years, Zandi says.
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