By David Lawder
WASHINGTON (Multibagger) - Vice President Kamala Harris and Republican opponent Donald Trump have proposed new tax breaks and spending plans in an effort to sway voters with promises of easing financial burdens.
According to budget forecasters, Trump's agenda is projected to significantly increase federal debt compared to Harris' plans. Trump aims to extend all 2017 tax cuts, exempt Social Security and tip income from taxes, and further reduce corporate income taxes. These changes could potentially add $3.6 trillion to $6.6 trillion to primary U.S. deficits over the next decade.
On the other hand, Harris' proposals, such as expanding the Child Tax Credit and introducing a $6,000 bonus tax credit for newborns, could either reduce deficits by up to $400 billion or add as much as $1.4 trillion over the same period.
The estimates are based on static budget scoring and are compared against the Congressional Budget Office's current-law "baseline," which already anticipates a $22 trillion increase in debt through 2034.
Rolling Analysis
Forecasts vary depending on which proposed ideas are included. For instance, estimates of Harris' tax deduction for business startup costs and a lower top capital gains tax are not fully factored in. Similarly, Trump's proposal to lower the corporate income tax to 15% is included, but recent comments about applying this rate only to U.S.-based companies are not.
Shai Akabas, economic policy director for the Bipartisan Policy Center, noted that campaign talking points are outpacing budget models, with candidates prioritizing popular policies over fiscal responsibility.
Congress must approve tax and spending legislation, making it challenging for the election winner to implement their priorities without significant majorities in both chambers.
2025 Tax Cliff
A key difference between Trump and Harris is how they approach the expiration of individual tax cuts passed in 2017. Trump aims to permanently extend all expiring tax cuts, including those for the wealthiest Americans, potentially reducing revenues by $3.3 trillion to $4 trillion over a decade.
On the other hand, Harris plans to extend the 2017 tax cuts for individuals earning under $400,000, which could add up to $2.5 trillion to her estimated $2 trillion spending agenda over the next ten years. Additionally, Harris supports the tax hikes proposed in Biden's fiscal 2025 budget, which could generate nearly $5 trillion in revenue.
Trump's approach relies on economic growth, import tariffs, and other measures to offset the cost of tax cuts, while Harris has endorsed revenue-raising initiatives to fund her spending plans.
Analysis Breakdown
For the average person, understanding the tax plans of Trump and Harris is crucial for assessing how these proposals could impact their finances. Trump's tax cuts could lead to a significant increase in federal debt, while Harris' plans include revenue-generating measures to offset spending.
It is essential to consider the potential effects on individual taxes, economic growth, and government revenue when evaluating these proposals. The winner of the election will face challenges in implementing their tax and spending priorities, given the need for congressional approval.
Ultimately, voters must weigh the trade-offs between tax cuts, deficit spending, and revenue-raising measures to make informed decisions about their financial well-being and the future of the country.