LEFT: President Donald J. Trump participates in a Sinclair Broadcast Group town hall event Tuesday, Oct. 20, 2020, in the Rose Garden of the White House. (Official White House Photo by Joyce N. Boghosian) RIGHT: Vice President Kamala Harris participates in a moderated conversation on reproductive rights with model and TV personality Chrissy Teigen, Thursday, June 20, 2024, in the South Court Auditorium of the Eisenhower Executive Office Building at the White House. (Official White House Photo by Carlos Fyfe)
The expiration of the Tax Cuts and Jobs Act, also known as the Trump Tax Reform of 2017, will expire in 2025. The Biden/Harris administration has plans to allow many of the law’s provisions to expire, hiking taxes on millions of Americans. The Tax Foundation provides a preview of what Americans can expect if Kamala Harris is elected:
Major business provisions modeled:
- Increase the corporate income tax rate from 21 percent to 28 percent
- Increase the corporate alternative minimum tax introduced in the Inflation Reduction Act from 15 percent to 21 percent
- Quadruple the stock buyback tax implemented in the Inflation Reduction Act from 1 percent to 4 percent
- Make permanent the excess business loss limitation for pass-through businesses
- Further limit the deductibility of employee compensation under Section 162(m)
- Increase the global intangible low-taxed income (GILTI) tax rate from 10.5 percent to 21 percent, calculate the tax on a jurisdiction-by-jurisdiction basis, and revise related rules
- Repeal the reduced tax rate on foreign-derived intangible income (FDII)
Major individual, capital gains, and estate tax provisions modeled:
- Expand the base of the net investment income tax (NIIT) to include nonpassive business income and increase the rates for the NIIT and the additional Medicare tax to reach 5 percent on income above $400,000
- Increase top individual income tax rate to 39.6 percent on income above $400,000 for single filers and $450,000 for joint filers
- Tax long-term capital gains and qualified dividends at 28 percent (as opposed to 39.6 percent as in the Biden budget) for taxable income above $1 million and tax unrealized capital gains at death above a $5 million exemption ($10 million for joint filers)
- Limit retirement account contributions for high-income taxpayers with large individual retirement account (IRA) balances
- Tighten rules related to the estate tax
- Tax carried interest as ordinary income for people earning more than $400,000
The Tax Foundation explains:
On a gross basis, we estimate that Vice President Harris’s proposals would increase taxes by about $4.1 trillion from 2025 to 2034. After taking various credits and tax cuts into account, Harris would raise about $1.7 trillion over 10 years on a conventional basis, and after factoring in reduced revenue from slower economic growth, the net revenue increase comes to $642 billion. We estimate the proposed tax changes would reduce long-run GDP by 2.0 percent, the capital stock by 3.0 percent, wages by 1.2 percent, and employment by about 786,000 full-time equivalent jobs.
We find the tax policies would raise top tax rates on corporate and individual income to among the highest in the developed world, slowing economic growth and reducing competitiveness. The tax credits and other carveouts would complicate the tax code, run more spending through the IRS, and, together with various price controls, fail to improve affordability challenges in housing and other sectors.
Many tax policies remain unspecified, including how Harris might deal with next year’s expiration of the Tax Cuts and Jobs Act (TCJA). Harris has not clearly indicated if or how her spending priorities align with the FY 2025 budget proposals. Depending on where she lands on these issues, the deficit impacts could be large.
In a possible scenario in which she extends the TCJA for all those earning under $400,000 and adopts all the spending proposals specified in the FY 2025 budget, we estimate the net effect of her policies would increase deficits by $1.5 trillion over the next decade, measured on a conventional basis. Including the economic impacts of the tax increases, the net effect could increase deficits by roughly $2.6 trillion over the next decade.
The wide range of possibilities reflects considerable uncertainty about her fiscal policy stance at this point, leaving a large void regarding how she might deal with the already unprecedented, dangerous, and unsustainable federal debt trajectory.
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