Voting with Your Wallet
Is Your Money on Clinton or Trump?
Which candidate is better for your budget's bottom line? A lot about this election is about money . . . who's got it, who needs it, how to raise it and how each candidate plans to help the American household.
By David Rae, Certified Financial Planner™, Accredited Investment Fiduciary™
Last week's first Clinton-Trump debate was one of the most watched events in the history of broadcasting and for good reason. My husband and I were parked right there in front of the television like everyone else. As a financial planner I can tell you that no matter which candidates box you check, one of the major issues you'll be voting is about money and the debates showed how true this is.
Money is fascinating because its abstract, mega-narrative - as in the economy, Wall Street and markets worldwide - is so powerful. At the same time it's also got a very concrete, personal one as well; how you're going to pay your bills, put food on the table, take care of your kids, stash some away for a rainy day and perhaps even enjoy yourself now and then. Untold quantities of ink have been spilled on how the former impacts the latter. Some feel that wealth trickles down (Trump), others feel that it simply evaporates at the top (Clinton.)
But on a personal level, economic statistics might not mean much. In Michigan for example, we know that when Barack Obama assumed the presidency in January 2009, he inherited a staggering unemployment rate of 13.7%. As of August of this year, this was down to an encouraging 4.5%. But, if you're one of those jobless 4.5% who still can't catch a break or is burdened by an outdated skillset, a sunny economic climate means absolutely nothing. It's scary and it hurts.
I was just in NYC appearing in two segments for Fox and Friends on the basic topic, "Who is better for the average American, Hillary Clinton or Donald Trump?" You really can't get much depth in a two-minute interview, so I wanted to share a few thoughts from a personal finance perspective.
Come January, whether you voted for the president-elect or their opponent, or didn't vote at all, we will have a new president and will be subject to the policies they want to implement. As a financial planner I want to make sure both my clients and my readers are proactive and prepared for any changes that may be coming your way. Let's look at whose policies of our candidates to see who will put more money in your pocket . . . or not.
Full disclosure: I was the nerdy kid who read a $3 used copy Donald Trump's book, The Art of the Deal cover to cover when I was in junior high. I've also had the pleasure of meeting President Obama at the White House, chatted with Michelle and had a 2-second pic snapped aside Hillary Clinton alongside her first lady portrait at another White House reception.
TOWING THE LINE ON TAXES
There may be some points that candidates are making that are technically true, but may really be irrelevant to your situation. Trump has stated that he will be lowering taxes for all Americans. For many, these tax saving may be very small and despite them, you may end up behind when taking into consideration what will end up getting cut like healthcare, Social Security benefits and childcare.
Trump on taxes
• The Trump tax plan will drop tax rates to three brackets of 10%, 25% and 33%, a 20 to 40% tax increase from his original proposed rates of 10%, 15% and 25%. Many Americans already pay very little if any federal income taxes. For the lower income earner making around $23,000 a year, Trump's plan is estimated to save about $100 per year. But as you move up the income scale the potential tax savings under Trump will be larger. By some calculations, the average one per center could see their taxes drop by nearly $180,000.
• While Trump proposes lowering the rate, he is also planning to eliminate many itemized deductions. So some people may end up with a lower tax bracket but a higher taxable income, which may negate the net benefits of that lower tax bracket.
• Trump's original tax plan would cost the federal government over $9 trillion over the next decade. This means either the national debt would explode, or unfathomable cuts would have to be made to spending on Medicare, Social Security and education. (More of an issue the further you are from being a 1 percenter) Since Trump has vowed to expand the military, don't expect to see cuts there.
Clinton on taxes
• According to her campaign, Clinton's tax plan should have minimal changes for 95% of Americans.
• Clinton's plan does impose some pretty hefty tax increases on those make more than $1 million and $5 million respectively.
• Unless you make more than $250,000 a year, even if your tax bill increases slightly over the long term, you should come out ahead when taking other things presently covered - childcare, Social Security, infrastructure investing and jobs - into consideration.
LOOKING AFTER CHILDCARE
"The average annual cost of day care now surpasses the price of in-state college tuition in 31 states"
- The Washington Post
"In half the country, the cost of childcare exceeds the cost of house"
- Ivanka Trump
Both candidates say they want to help parents but they go about it in a slightly different manner.
Trump on childcare
• Trump wants to offer tax deductions for childcare. The higher your income the more tax deductions will save you making Trump's plan is better for higher earners. On the other hand if you pay for childcare but don't have much in the way of taxable income you really don't get much benefit if any from tax deductions.
Clinton on childcare
• In contrast, Clinton wants to offer childcare tax credits and cap the out-of-pocket families spend on it at 10% of their income. Generally tax credits are more valuable than deductions because you don't need to have taxable income to benefit from the credit. Clinton's plan helps all families, but stands out for families at the bottom 75% of the income scale.
SAVING SOCIAL SECURITY
Many people are concerned about Social Security's future as they will be depending on this benefit as a major part of their secure retirement. Big differences between the two here.
Trump on Social Security
• Trump is vague on specifics but has vowed to leave Social Security as is or potentially expand it. Social Security is in dire need of an update, and just leaving it as is won't improve the chances of it being there when future retirees go to collect.
Clinton on Social Security
• Clinton has a plan to make Social Security solvent for the next 75 years. This is great news for younger Americans and anyone who will be depending on this money as part of their retirement plans. Clinton's outline also seeks to expand the benefits for the most at-risk Americans, many of whom are veterans. She plans to pay for this Social Security expansion with a tax increase for those making more than $250,000 per year.
Having appropriate healthcare is a major part of any financial plan. If you have insurance through work or the ACA you probably don't think that much about it. On the other hand if you run into a health issue even while insured your finances may still be thrown into chaos, which may be why healthcare is such an important issue with so many voters. The candidates differ dramatically on this.
Trump on healthcare
• Trump has vowed on day one to repeal and replace the Affordable Care Act (ACA, aka Obamacare). Health insurance is onerous and complicated; I have my doubts about how easy it will find an alternative to the ACA. Repealing the ACA would be devastating to the 20 million American currently using the plans, and similarly would affect anyone who may need coverage in the future when they start their own businesses, or find themselves in a job that doesn't offer it.
Clinton on healthcare
• No surprise that Clinton supports Obamacare. You should expect her to continue improving the program. Whether you like the ACA or not, having the ability to get health insurance regardless of prior health issues can be a lifesaver for you families finances, and means you are stuck at your current employer if nothing else but to keep your health insurance.
The topics above are a bit easier to assess based on your particular, individual situation. The items below are take a bit more conjecture to analyze, so I want to give you few things to think about rather than just cold hard numbers.
THE STOCK MARKET
If you don't own any investments (come on now, get to it!) this part probably won't affect you much. For the rest of us, stock market investors don't like uncertainty. Yet everything Donald Trump does seems to scream uncertainty. Let's not forget that since the Great Depression stock markets in the U.S. have performed better under Democratic presidents that Republican ones (the siren's call of Reaganomics notwithstanding). To be sure, two huge financial crises under George W Bush's watch helped usher liberal Democrat Obama into the White House. No surprise the Stock Market jumped the day after the first Presidential where Secretary Clinton had a crushing victory over the sniffling Donald J Trump.
As I noted earlier, tax brackets really don't mean much if you don't have a job, or just as bad, if you work full time and still can't afford food or housing.
Trump on jobs
• Trump claims he wants to bring more good paying jobs here, and prevent employers from going overseas, yet at the same time he says the minimum wage is too high. You can't have it both ways.
• Trump is big on business but unfortunately this does not automatically result in millions of high paying jobs as he says it will. Ethical businesses create good jobs; unscrupulous ones exploit their workforces and do not. Historically, American workers have not fared well under the trickle down economy of the past 40 years or so.
Clinton on jobs
• Clinton is in favor of increasing the minimum wage, which directly impacts around 25% of the workforce, and many more if you count their dependents and those whose pay is tied to the minimum wage.
• Clinton wants jump-start job growth by supporting a variety of policies that benefit small businesses. Let's remember that today's small potatoes entrepreneur working out of a garage (hello Steve Jobs, how ya doin' Bill Gates) is tomorrow's CEO of a multi-national corporate superpower.
• Donald Trump insists his tax plan reduces the income tax for all Americans. While true (as it stands now) you save few bucks now on taxes, you could lose out on thousands later in reduced Social Security benefits, or increased costs for things like healthcare and Social Security payments. Trump is wrapping a 'huge' gift for the rich here but touting it as benefit for the middle class.
• On the other hand, Hillary Clinton appears to be taking opposite approach. Her plans benefit a wide swath of lower and middle class Americans while increasing the burden on the highest earners in the country.
I find it baffling that the so many impoverished and uneducated citizens are voting against their best interests with Trump. At the same time, I am gratified and encouraged by the list of millionaires and billionaires who in Clinton are voting against their own financial interests (but let's face it, they're not going to be lining up for government cheese any time soon) for the good of the country and their fellow citizens.
I've already booked my hotel for the inauguration but I can only see myself standing outside for hours in 20 degree weather for one of these candidates. To be sure, I'll be wrapped up nice and toasty to greet her . . . the 46th president of these United States.
Until next time, be fiscally fabulous, and remember your money matters.
DAVID RAE, CFP®, AIF® is a Los Angeles-based retirement planner with Trilogy Financial Services. He has been helping friends of the LGBT community reach their financial goals for over a decade. He is a regular contributor to the Advocate Magazine and Investopedia as well as the author of the Financial Planner Los Angeles Blog. Follow him on Facebook, or via his website www.davidraefp.com
Securities and advisory services offered through National Planning Corporation (NPC), Member FINRA, SIPC, a Registered Investment Advisor. Trilogy Capital Trilogy Financial and NPC are separate and unrelated entities. The opinions voices in this article are for general information only. They are not intended to provide specific advice or recommendations for any individual and do not constitute and endorsement by NPC. To determine which investments may be appropriate for you, consult with your financial professional. Please remember that investment decisions should be based on an individual's goals, time horizon, and tolerance for risk.