How a Trump or Biden Win Will Impact Your Money

Two candidates with starkly different visions for the country’s future. A pandemic that’s not yet under control. And an economy still reeling as millions of people remain unemployed.

There is a lot riding on the results of the U.S. elections on Nov. 3. Whether President Donald Trump or challenger Joe Biden triumphs could shape the way millions of Americans save, spend and manage their finances for years.

These are the ways the candidates and their respective parties could affect your wallet:

Trump has vowed to slash taxes for the middle class and build on the cuts he passed in his first term. But heading into November, he has offered no concrete plan about how he would go about doing it. White House economic adviser Larry Kudlow has long suggested the administration is exploring a tax reduction for middle-class families.

This promise for a “Tax Cut 2.0” was an indirect response to criticism that Trump’s 2017 tax cuts mostly benefited the rich and corporations. While it did offer tax reductions for middle-class families, 60% of the cuts went to the country’s top 20% earners, according to research by the nonpartisan Tax Policy Center.

Biden has proposed a tax plan that would indeed increase taxation, but his taxes target the wealthy. He has promised to enact a number of polices, including an income tax, a capital gains tax and payroll tax, the weight of which would fall on people making more than $400,000 a year.

Their tax rates would edge up to 39.6% from 37%. The Tax Foundation estimates that by 2021, if Biden’s tax plan were enacted, the top 1% of taxpayers would see their after-tax income reduce by 11.3% and the top 5% would see it shrink by 1.3%. Those in the 90th to 95th percentile would see their after-tax incomes reduced by 0.2%.

That doesn’t necessarily mean the middle class is in the clear. Biden’s tax plan would raise about $3.4 trillion over the course of 10 years. But the cost of his plans is estimated at $5.4 trillion, according to an analysis by The Wharton School at the University of Pennsylvania. Biden has yet to provide specifics on how he would finance the difference of almost $2 trillion. “I just don’t see another way that he can go, than to raise taxes on the middle class, because that’s where all the money is,” said Andrew Silverman, a tax analyst for Bloomberg Intelligence.

Trump has promised to create 10 million new jobs in 10 months, though both details and the precise timeframe are fuzzy. The president often points to broad-based job gains before the pandemic as evidence of his economic stewardship. Through February, employment had increased by 6.8 million since January 2017, and the unemployment rate had fallen to a 50-year low.

But many of the jobs created paid low wages. Some 41% of jobs added between Jan. 2017 and Feb. 2020 were in leisure, hospitality, education and health services, where earnings average less than $1,000 per week.

Biden has indicated his plan to grow U.S. employment includes $400 billion for manufacturing and $300 billion for research and development, which he says could create 5 million jobs on top of those lost to the coronavirus outbreak.

He has not attached a timeframe to his plan, though he would face pressure to achieve it by the end of his first term. Biden has also vowed to raise the federal minimum wage to $15 per hour, while Trump argues that such a mandate would hurt small businesses.

Trump often touted a strong stock market before the pandemic. Business-friendly policies and less regulation helped boost the S&P 500 index roughly 60% since Trump won the 2016 election — even after the Covid-19 shock that sent stocks into the fastest bear market on record.

But that has been offset by Trump’s trade war and tariffs on imports. Such levies have often meant that consumers had to pay more for goods. In fact, they cost the typical U.S. household approximately $831, according to research by the New York Federal Reserve. Moody’s Analytics estimated that the trade war with China also cost the U.S. about 300,000 jobs and that if the duties remain in place, more jobs could be lost.

What’s more, the vast majority of Americans have not benefitted from rising stock prices. Federal Reserve data show that only about 53% of families held stock positions in 2019, while the top 10% of Americans, who hold more than 88% of those shares, reaped the benefits. Since 2002, upper-middle-class Americans have seen a 10 percentage-point decline in their equity interest in companies.

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