Presidential Candidates' Tax Plans: Trump vs. Harris

One of the most crucial questions in any election is how presidential candidates plan to approach taxes. This year’s nominees, former President Donald Trump and Vice President Kamala Harris, have starkly different proposals.

Overview of Plans

• Trump would prioritize income tax cuts for wealthier Americans and corporations.
• Harris would raise taxes on those groups.
• Both candidates would jettison taxes on tipped income.

Funding the Proposals

• Trump’s Plan: Relies on increased tariffs and anticipated faster business growth. Economists doubt the viability of this approach.
• Harris’ Plan: More modest tax cut package, less debt than Trump. Economists project slower growth due to corporate tax increases.

Trump’s Tax Policies

Trump plans to:

• Extend his 2017 tax law, benefiting wealthier taxpayers disproportionately. This would cost $5.3 trillion in federal tax revenue over 10 years.
• Reduce the corporate tax rate to 15% for domestic production, costing an additional $200 billion.
• Remove taxes on Social Security benefits, tips, and overtime work, costing $3.6 trillion.
• Restore the state and local tax deduction, favoring affluent households in high-tax states.
• Potentially replace individual income taxes with tariffs, though this is not formally proposed.

Harris’ Tax Policies

Harris plans to:

• Extend 2017 tax cuts only for those earning less than $400,000, costing $3 trillion over 10 years.
• Enact a billionaire minimum tax and increase long-term capital gains tax to 28% for those earning $1 million+.
• Expand the child tax credit to $3,000 ($3,600 for children under 6) and $6,000 for families with newborns, costing $1.4 trillion.
• Eliminate taxes on tips, estimated to cost $200 billion.

For corporations:

• Raise the corporate tax rate to 28% and the alternative minimum tax to 21%.
• Quadruple the tax on stock buybacks to 4%, increasing federal revenue by $1.8 trillion.

Impact on Households

• Trump’s Plan: Benefits skew toward wealthier Americans; bottom 60% see modest gains.
• Harris’ Plan: Bottom 60% gain more; top 5% pay more in taxes.

By 2026:

• Trump’s Plan: Increases after-tax income for all income groups, with top earners gaining the most.
• Harris’ Plan: Significantly increases after-tax income for low-income earners, with top earners seeing declines.

Economic and Federal Debt Impact

• Trump’s Plan: Increases federal debt by $7.5 trillion over 10 years, potentially harming the economy due to reliance on tariffs.
• Harris’ Plan: Increases federal debt by $3.5 trillion over 10 years, with slower economic growth due to corporate tax hikes.

The Tax Foundation projects:

• Trump’s plan: +1.5% GDP from tax changes, -1.7% GDP from tariffs, resulting in a 0.2% net decline.
• Harris’ plan: -2% GDP over a decade due to high corporate and individual tax rates.

The Penn-Wharton Budget Model projects:

• Trump’s plan: -0.4% GDP by 2034.
• Harris’ plan: -1.3% GDP by 2034.

Sources

• PolitiFact on Trump’s Promises
• PolitiFact on Harris’ Promises
• Committee for a Responsible Federal Budget Report
• Penn-Wharton Budget Model on Harris
• Penn-Wharton Budget Model on Trump
• Tax Foundation on Harris
• Tax Foundation on Trump
• New York Times on Trump’s Tax Plan
• Email interviews with John Buhl and Garrett Watson, Sept. 19, 2024.