In February, I discussed the leading presidential candidates’ positions on tax and health care on CJAD 800AM, reviewing the platforms of Bernie Sanders, Hillary Clinton, Ted Cruz and Donald Trump. Last week, The Atlantic published a US presidential race cheat sheet with a byline stating that November’s presidential race will most likely be run by Hillary Clinton and Donald Trump, based in part on these candidates’ recent victories in the Northeast primaries. Now that the presidential race’s true frontrunners are more clear, an updated discussion of Clinton and Trump’s platforms is warranted.
As such, this blog provides a high-level primer of three key aspects of Clinton and Trump’s campaigns: immigration, tax and health care. These three issues are significant for Canadians who are interested in spending more than six months in the US per year.
Although the much-discussed wall along the Mexico-US border continues to monopolize news headlines, Trump has proposed other immigration reforms as well, some of which have consequences for Canadians. Two key Trump proposals that may negatively impact Canadians hoping to live and work in the US include i) his proposal to halt the issuance of green cards to certain foreign workers, requiring US employers to hire domestic workers in an effort to reduce the number of immigrants allowed into the US; and ii) his proposal to reform visa requirements so that work visas like the H-1B visa are distributed on a limited basis. Trump plans to accomplish the latter by requiring US employers to hire domestic workers for H-1B jobs before filling such positions with foreign workers who apply via the H-1B program.
While Trump is focused on tightening the US border in order to increase employment for American citizens, Clinton is less focused on the economic aspect of immigration reform. Her immigration platform does not explicitly discuss limiting the number of new green cards or work visas that can be issued to foreigners, but instead focuses on reforming immigration in a way that eases the path to US citizenship for lawful permanent residents (green card holders) in order to keep families together.
The impact of a Clinton presidency on Canadians who hope to live and work in the US by becoming permanent residents or obtaining work visas remains to be seen, but Clinton’s approach to immigration for those already in the US is more favourable than Trump’s.
First, Trump plans to simplify the American tax system by reducing the number of tax brackets from seven brackets to four brackets. Perhaps more importantly, Trump plans to reduce income tax rates as well as long-term capital gains/dividends tax rates to the lowest rates in effect since prior to World War II. Under a Trump presidency, the income tax rate would be 25% for those in his proposed highest tax bracket: single filers who earn over $150,000 USD of annual income and married filers who earn over $300,000 USD. The long-term capital gains/dividends rate would be 20% for taxpayers in this bracket, which is the same as the current top long-term capital gains/dividends tax rate. However, the top income tax rate is currently set at 39.6% for single filers who earn over $415,050 USD of annual income and married filers who earn over $466,950 USD per year, so Trump is proposing a significant income tax cut of approximately 20% for these high income earners.
Another key Trump tax platform is his commitment to eliminating US estate tax, commonly known as the “death tax,” a tax that US citizens and residents may have to pay on their worldwide assets upon death and that Canadian residents who own US property may have to pay on the value of their US-situs assets upon death.
Trump’s tax reforms would therefore benefit both American and Canadian residents who own US property or who earn US income, as well as Canadians who are planning a permanent move to the US and may therefore earn US income and acquire US-situs assets that may become subject to US estate tax.
Clinton’s tax platform, in contrast, is centred around raising income tax for high-income earners and broadening the application of the US estate tax. She proposes increasing the top US estate tax rate from its current 40% rate to 45%. Also, estates worth $3.5 million USD or more would be subject to US estate tax (compared to the current law, which only subjects estates worth more than $5.45 million USD to the tax). Clinton also proposes creating an additional tax bracket with a 43.6% income tax rate for those who earn $5 million USD or more per year. Long-term capital gains/dividends tax rates for these high-income earners would be 24%. The income tax rate for single filers who earn more than $415,050 USD but less than $5 million USD and married filers who earn more than $466,950 USD but less than $5 million USD would be 39.6%, which, as mentioned, is the current top income tax rate. The long-term capital gains/dividends tax rate for individuals in this bracket would be 20%, which is also the current rate for 2016.
Thus, Clinton’s tax reforms aim to increase taxes on only the top 5% of taxpayers; 95% of US taxpayers would not feel the impact of her proposals. It is also worth noting that Clinton plans to cut taxes for low and middle-income earners. Nonetheless, a Clinton presidency would likely be less beneficial for high net-worth US taxpayers than a Trump presidency.
3. Health Care
Trump is adamant about repealing the Affordable Care Act, more popularly known as ObamaCare. He aims to revamp the American health care system by replacing ObamaCare with reforms that will extend health care access to all Americans by using “free market principles” that will ultimately lower the cost of health care.
For Canadians who are moving to the US or those who are already lawfully living there (such as green card holders), ObamaCare can be beneficial: it ensures that individuals with pre-existing health conditions and those over age 65 are not denied health insurance coverage by private insurers. If ObamaCare is abolished, it may be more challenging for Canadians moving to the US to receive the health insurance that they need, depending on the specific details of Trump’s reforms.
Clinton has been a long-time supporter of ObamaCare and pledges to expand the law so that even more Americans can benefit from it. For instance, among many other reforms, she plans to reduce the cost of the health insurance coverage available through ObamaCare, and she also plans to reduce the cost of prescription drugs. Clinton’s commitment to expanding affordable health care and ensuring that ObamaCare is strengthened rather than abolished could be helpful for Canadians moving to the US as well as those who are already lawfully residing there.
This blog was intended as a general overview of the potential impact that a Clinton or Trump victory can have on Canadians. It is important to remember that both candidates’ proposals are merely election race promises meant to entice the voting public. In reviewing Clinton and Trump’s platforms, I am reminded of the daily negotiations I’m currently having with my toddler, who is sick with an ear infection. My wife and I promise him that he can have a chocolate cookie if he takes his medicine, but he has to take his medicine before he can have the cookie (we are very skilled in the art of negotiation). Of course, my son asks for the cookie first, promising that he’ll take his medicine after, much like the presidential candidates who ask for votes and promise to make changes after being elected. Unfortunately, American voters don’t have the same authority as me and my wife: they will each have to cast a vote for a US presidential candidate, effectively giving away chocolate cookies without any assurance that their chosen candidate will follow through on any of the above-described proposals. Being aware of the candidates’ platforms, however, allows voters to make an informed choice on election day.
Whether the American landscape will shift drastically after election day remains to be seen: many Americans are considering moving to Canada if Trump is elected president, a topic that was outside the scope of this blog.
For more information about the impact of moving from the US to Canada or vice versa, and to explore the planning opportunities available for Canadians moving stateside or Americans moving north of the border, please contact us.
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