Tax Policy Alert: Potential Harris Tax Plan
Tax policy could be a key issue in the 2024 presidential election. Significant changes will happen in the next presidential term even without new legislation, as a number of tax provisions in the 2017 Tax Cuts and Jobs Act are set to expire at the end of 2025.
As a senator, Vice President Kamala Harris voted against the Tax Cuts and Jobs Act and, as a presidential candidate, backed repeal of the law in 2020. She said on “day one” she would “repeal that tax bill that benefits the top 1% and the biggest corporations of America.” “Whereas the last administration gave tax cuts to billionaires, we gave tax cuts to families through the Child Tax Credit, which cut child poverty in America by half,” Harris said. (Before withdrawing from the race, President Biden had proposed extending the tax cuts that expire after 2025 in exchange for increasing taxes on high-income households.)
Harris has closely followed President Biden on tax issues, supporting Biden’s tax agenda of increasing taxes on corporations and high-income households. She has pledged to not raise taxes on households making less than $400,000 a year. Some key differences have emerged and she could further differentiate herself through some of the ideas raised during her brief 2020 presidential campaign. Notably, she did not support a wealth tax in 2020.
Individual Tax Proposals
Excluding tips from taxation: Harris supports exempting tips from taxes. “When I am president, we will continue our fight for working families of America, including to raise the minimum wage and eliminate taxes on tips for service and hospitality workers,” she said. Former president Trump has notable supported this idea.
Child tax credit: Harris proposed a $6,000 tax credit for parents of newborns, a $3,600 tax credit for families with older children.
Universal basic income: As a senator, Harris proposed the LIFT Act, which would have provided a $500 monthly tax credit for families earning less than $100,000 annually. It would have provided individuals a $3,000 tax credit and married couples a $6,000 credit.
Corporate and Business Tax Proposals
Increasing corporate tax rate: As a candidate in 2020, Harris supported increasing the corporate tax rate from 21% to 35%; Biden supported increasing it to 28%. The TCJA reduced the corporate income tax rate to 21% from 35%.
Transaction tax: As a presidential candidate in 2020, Harris supported a financial transactions tax of 0.2% for stocks, 0.1% for bonds, .002% for derivatives as part of a health care proposal.
Offshore income: As a presidential candidate in 2020, Harris supported taxing “offshore corporate income at the same rate as domestic corporate income.”
Expiring TCJA Provisions
Harris supports allowing the TCJA tax provisions to expire at the end of 2025. Key provisions include:
Increase tax rates on high earners: If the TCJA expires, the top individual tax rate will increase to 39.6% from 37%. The top rate on capital gains would increase to 44.6% from 20%, as the Medicare taxes could increase from 3.8% to 5%.
Increase in standard deduction: The individual standard deduction would decrease to $6,200 from $12,400 upon expiration of the TCJA.
Reduced estate tax exclusion: Individual estate tax exemption exclusions would decrease to around $6.5 million from $13 million if the TCJA expires.
Expiration of Qualified Business Income Deduction: If allowed to expire with the TCJA, small businesses would no longer be allowed to deduct up to 20% of their business income before it passes through to their individual tax returns.
End of “bonus depreciation”: If allowed to expire after it phases out in 2025, businesses would not be allowed a first-year “bonus depreciation” for capital investment.