Though sparse on details, the broad outlines of what Vice President Kamala Harris and former President Donald Trump want to do on taxes are clear — and they are very different.
Trump’s tax proposals are tilted to benefit wealthy Americans and large corporations. Under Harris, the bulk of personal gains would come to those with lower and lower-middle incomes, according to the Penn Wharton Budget Model.
“Harris has a more ‘coherent’ plan because she’s essentially got [President] Biden’s budget proposals, which are fairly scored, scrubbed and all that stuff,” said Douglas Holtz-Eakin, president of the conservative-leaning American Action Forum and former director of the nonpartisan Congressional Budget Office. “We know that agenda — enhance the child tax credit, raise the corporate rate, tax high-income people.”
Trump, he said, “has got a more tax cut orientation. He’s talked about a 15% corporate rate” — down from the current 21% — “and now he’s walking around and offering a handout at every rally on what he’s not going to tax next — tips, Social Security, overtime. It looks to me he’s just trying to match her on middle-class tax cuts.”
To extend or not extend
Trump’s approach is to double down on what he did in his four years in the White House: first, make permanent the expiring provisions in his signature tax-cut package that passed in 2017.
Key elements of the 2017 Tax Cuts and Jobs Act were written to expire at the end of 2025. That includes higher standard deductions, a lower top marginal tax rate, bigger child tax credits, lower estate taxes and certain deductions tailored for small businesses.
The most expensive part of Harris’ tax plan would be an expansion of the child tax credit, to $3,000 per child — $3,600 for those under 5 years of age — and $6,000 for the first year. Harris also wants to exempt tip income and expand housing tax credits, including down-payment support for first-time homebuyers.
Harris has been silent about the expiring provisions, but it’s possible she would extend them, but only for individuals making less than $400,000, a threshold the Biden administration has previously suggested.
How to pay for tax cuts
Harris would look to offset the loss of tax revenue by raising the corporate income tax rate to 28% and increasing the long-term capital gains and the net investment income tax for high earners.
The Democrat has also proposed enacting a billionaire minimum tax and quadrupling the tax on stock buybacks — something corporations did a lot of with their windfalls from the 2017 tax cuts.
As president, Trump referred to himself as the Tariff Man, and tariffs are at the heart of his plan to generate additional tax dollars. The Republican has talked about levying a 10% tax on all imports to the U.S., and an eye-popping 60% tariff rate on all goods coming from China.
Deficits and growth
Would Trump’s tariffs be enough to balance the budget? No one can say for sure, but a lot of that would probably come out of the pockets of consumers, costing the typical middle-income household about $1,700 a year, according to the Peterson Institute for International Economics.
Budget experts say that based on what’s known today, both candidates’ plans are likely to increase the federal deficit by trillions of dollars over the next 10 years.
Interest payment on U.S. Treasury debt this year hit $1 trillion for the first time ever, even more than the federal defense budget. Analysts are divided on which plan will generate more economic growth, but one thing is clear: More and more public debts will increasingly crowd out investment and accumulation of private productive capacity.
“We’re giving up little pieces of our standard of living every year,” said Holtz-Eakin.
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