Democratic, Republican 2016 Plans Differ on Payroll Aspects

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By Howard Perlman

Provisions of the 2016 platforms of the two major U.S. political parties, and the campaign statements of the parties' presidential candidates this year, could affect payroll processing if implemented.

Minimum Wages

The Democratic Party wants to raise the federal minimum hourly wage to $15 through incremental annual increases until the rate reaches that level, then index the rate for inflation for subsequent years, the party said in its 2016 platform released July 21. The current standard federal hourly minimum wage of $7.25 is not indexed to inflation.

“We also have to recognize some states and some cities will go higher, and I support that,” Hillary Clinton, Democratic Party nominee for president, said April 14 during a debate in New York. Subminimum wages for tipped workers and people with disabilities would be eliminated under the Democratic Party platform.

The Republican Party's 2016 platform, released July 18, suggests that minimum wages “should be handled at the state and local level.”

Donald Trump, Republican Party nominee for president, has said that he does not want the minimum wages among the states to be lower than they currently are. On the contrary, “the minimum wage has to go up” in some states based on their cost of living and in some cases should be “at least $10,” Trump said July 27 at a news conference in Doral, Fla.

Income Taxation

Clinton has said that taxes on the middle class should be lower than they are, with increased income tax rates for wealthier individuals, positions in accordance with the Democratic Party's 2016 platform. On Clinton's campaign website, she said there should be a surcharge on multimillionaires and billionaires to ensure they “do not pay a lower tax rate than the hardworking middle-class families,” but did not offer specifics on how the number of tax rate brackets, and the rates and income ranges applicable to the brackets, could be adjusted under her presidency.

The ways these general proposals might take effect if Clinton is elected are uncertain, so the effects of these proposals on federal income tax withholding are unclear. A request by Bloomberg BNA for more details on an income tax plan was declined Aug. 5 by the Clinton campaign.

Trump said on his campaign website that he wants to implement an income tax system with three tax brackets, down from the current seven. The maximum annual income level before taxation would occur would be about 11 times higher under Trump's plan than under the federal income tax withholding tables for 2016, $25,000, compared with $2,250.

For single filers, the first tax bracket under Trump's plan would include annual income of more than $25,000 but up to $50,000; the second bracket, more than $50,000 but up to $150,000 and the third bracket, more than $150,000. Income in the first bracket would be taxed at 12 percent, second bracket, 25 percent and third bracket, 33 percent, Trump said Aug. 8 during a speech in Detroit, modifying his previously proposed rates of 10 percent, 20 percent and 25 percent. The current maximum income tax withholding rate is 39.6 percent.

The Internal Revenue Service may make income levels applicable to the brackets slightly higher for income tax withholding to help with collection. However, under a Trump presidency, income tax interactions with the federal government also could be different because the Republican platform supports “making the federal tax code so simple and easy to understand that the IRS becomes obsolete and can be abolished.”

Affordable Care Act

The Affordable Care Act, which established payroll-related filing requirements and caused employers to enhance tracking of employees' hours to comply with coverage provisions of the law, would generally be preserved by the Democratic Party.

While proposing to keep the law mostly intact, the Democratic platform calls for repealing the ACA surtax of 40 percent on high-cost health plans, known as the “Cadillac tax.”

However, the Republican platform recommends repealing the ACA, consequentially eliminating the ACA's payroll-related requirements.

Social Security

The Democratic and Republican Parties both support continuance of the Social Security program.

The Democratic platform specified the party would tax income of at least $250,000 to help fund Social Security, a plan that if implemented would result in a Social Security taxable wage base of more than double the current amount of $118,500.

Social Security would be funded without further tax increases if the Republican platform recommendation were implemented.

Other Aspects

Federal laws that would require employees to have at least 12 weeks of paid family and medical leave in some circumstances and at least seven days of paid sick leave a year were proposed in the Democratic platform. These aspects were unaddressed in the Republican platform.

A federal law that would require businesses to use E-Verify to check the employment eligibility of workers was proposed in the Republican platform. E-Verify was unaddressed in the Democratic platform.

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