While there are clear differences in the candidates’ overall approach to government, nowhere are they bigger than when it comes to their plans for changing the tax law.

Tom Wheelwright

Let’s start with former Secretary of State Clinton’s current proposals. Clinton suggests a tax on those earning more than $5 million per year and a change to the capital gains rates.

The capital gains change would have an impact on businesses, and particularly on options granted to corporate officers. Under her proposal, a taxpayer would have to hold stock for more than six years to get the full tax benefit of long-term capital gains. Under current law, the capital gains rate applies to stock owned for more than one year. The goal of this proposal is to create stability in the markets.

Who knows if that would be the result. It will create an incentive to leave money in the market longer, and likely mean fewer selloffs and a higher market price.

Business leader Donald J. Trump, on the other hand, wants to overhaul the tax system similar to the way Ronald Reagan did in 1986. Like Reagan, Trump wants to reduce the number of tax rates.

Under Trump’s proposal, there would be three individual rates, 12%, 25%, and 33%, and only one business tax rate, 15%. Like Reagan’s tax plan, Trump would eliminate some tax benefits, although which benefits those would be have yet to be determined. Reagan’s plan went through a similar process, resulting in the addition of passive loss rules, which led to the savings and loan and real estate crisis of the late ‘80’s.

Trump’s changes would also have an impact on the economy. What impact is yet to be determined.

Let’s take a closer look at how the candidates compare in four key tax areas.

Corporate. Trump wants to make three changes that would be very favorable to business. First, he wants to limit the highest tax rate for business income to 15%. Both corporations and small businesses would pay a maximum rate of 15%. The intended result is to make U.S. companies more competitive with the rest of the world. (The U.S. currently has one of the highest corporate tax rates in the world, and also pays a Value Added Tax (VAT) for goods shipped into other countries.)

Clinton would not change the corporate tax rate, continuing the challenges faced by U.S. corporations trying to compete on a global stage.

Multinational Corporations.Trump wants to allow multinational corporations to bring income back into the country without paying the current 35% tax rate. This would be an amnesty, with a one-time tax of 10% on the repatriated income. The intention is to put more money to work in the U.S. economy rather than having it trapped outside the United States.

Hillary Clinton would take the opposite approach. She would penalize companies that operate outside the United States by requiring them to pay tax on worldwide income. That would stiffen the rules already in place, much as President Obama has proposed.

Estate Tax. Trump wants to eliminate the estate tax. While this is not normally considered a business tax break, the reality is quite different. Eliminating the estate tax would allow businesses to pass from one generation to another without a tax consequence. Since the IRS is already taking a much sterner view of estate and gift tax discounts on closely held businesses, eliminating the estate tax would make inter-generational transfers of businesses considerably easier.

Clinton’s estate tax plan does the opposite. Her plan would lower the exclusion from $5.45 million to $3.5 million and increase the estate tax rate, likely making it costlier to transfer business ownership to the next generation.

Carried Interest Rate Rule. This is one area where the candidates agree. Both Trump and Clinton would eliminate the Carried Interest Rule, subjecting gains by hedge fund managers to ordinary income tax rates. However, since Trump wants to lower the business tax rate to 15%, his proposed change in the carried interest rule may have no real impact if carried interests are considered business income.

The reality is that Congress would have to get behind any major tax policy changes for them to occur. Ronald Reagan had the advantage of a Republican House and Senate willing to back his policies. It’s doubtful that either Clinton or Trump would have similar backing, at least not in their first term in office. Still, it’s worth paying attention to the proposals, since it’s likely that at least some of them, such as the elimination of the Carried Interest Tax benefit, will eventually be enacted.

Clearly Clinton is proposing to raise taxes on businesses, while Trump’s plan is a very good start towards correcting a long-standing policy of punishing U.S.-headquartered corporations. Trump’s plan would likely ultimately be modified, although the end result could significantly improve the competitiveness of U.S. business with the rest of the world.

Lowering the business tax rate is critical to U.S. worldwide competitiveness and bringing jobs back to the United States. And an amnesty to allow companies to repatriate income without a major penalty would provide needed capital for U.S.-based businesses. While Trump may be fuzzy on many of his policies, when it comes to tax policy, his plan is the clearest, most business-friendly policy we have seen in many years.

Tom Wheelwright is the founder and CEO of ProVision, a strategic CPA firm.