Taxation has become one of the most hotly debated topics in the United States presidential election campaign, as it is an area where both candidates are trying to highlight their policies and differentiate themselves from each other.
Some voters are hoping the candidates can provide more specific information on how they plan to turn around the economy and help ordinary Americans.
Regardless of who wins the White House in November, they will face expiring tax cuts worth trillions of dollars. The Trump administration’s Tax Cuts and Jobs Act of 2017 is set to expire in 2025.
This is a concern for many voters because the expiring tax cuts could impact their financial situation. According to the Tax Foundation, “if Congress does not take action, beginning in 2026, most Americans will face higher taxes, worse job and investment incentives, and a more complex tax system.”
Overall, both Trump and Harris have called for tax reforms. Additionally, both have proposed tax cuts and increases that would require approval from Congress.
Many parts of the tax cuts implemented by Trump in 2017 are set to expire in 2025. This leaves the incoming administration and new Congress with a limited time to decide which provisions to keep, which to let expire, and how to handle other aspects of the TCJA. Whatever action they take will impact the federal deficit and the tax burdens of millions of families and businesses.
The TCJA made comprehensive changes to individual and corporate taxation, lowering individual income tax rates, increasing standard deductions and child tax credits, significantly reducing corporate tax rates and certain non-corporate business rates, among other changes.
It simplified the tax for many families by reducing their reliance on itemized deductions and the Alternative Minimum Tax (AMT), although these benefits were to some extent offset by the more complex tax for businesses.
However, the costs of the legislation are not to be ignored. According to the Congressional Budget Office, the TCJA is projected to increase the federal deficit and debt by over $2 trillion in the first 10 years.
Furthermore, William G. Gale, a researcher at the Tax Policy Center at the Brookings Institution, stated that the TCJA exacerbated the already large income disparities, making the rich richer with little help for the poor. Their analysis shows that the bottom 20% of households saw an average increase of about $60 in income annually, while the wealthiest 1% saw an average tax cut of over $50,000 per year.
Both presidential candidates have talked about tax cuts and increases during this election season. Of course, many voters prefer to hear plans that could potentially lower their tax burdens.
Trump plans to retain some of the individual and corporate tax cuts implemented under the 2017 version of the TCJA. The Trump campaign team states that these tax cuts have benefited millions of Americans and can help millions who are facing the impact of inflation and rising prices.
Additionally, the campaign team says that individual tax cuts and corporate tax reform will help stimulate economic growth and address higher cost of living without inflationary government spending.
Harris has not directly mentioned whether she would extend the TCJA during the campaign, but some Democrats have expressed their support for the TCJA.
President Biden’s chief economic advisor has indicated support for partially extending the TCJA.
According to the Tax Foundation’s records, Harris has consistently supported higher taxes on corporations and individuals than Biden. Of course, any changes to domestic taxation laws would require approval from Congress.
Harris has stated that she would push to raise the corporate tax rate from 21% as implemented by the TCJA to 28%. She also proposed increasing taxes on high-income individuals, raising the top marginal income rate from 37% to 39.6%.
She also proposed taxing investment income over $1 million at ordinary income tax rates rather than at lower capital gains tax rates.
Trump has not detailed plans to increase domestic taxes. However, he calls for imposing comprehensive tariffs on foreign imports, and the former president has also mentioned considering a tariff policy to abolish federal income taxes.
Tariff policies do not require Congressional approval.
Trump and Harris agree on one thing: no tax on tip income. Both campaigns have discussed this plan.
Since June, Trump has campaigned on a “no tax on tips” policy, and he even announced this policy more directly at the Republican National Convention in Milwaukee earlier.
Harris promised a “no tax on tips” policy at her rally at the University of Nevada Las Vegas on August 10.
In fact, when Trump first proposed this idea, media reports were mixed. But soon, Harris and other Democrats also expressed support for removing income tax on tips.
Bipartisan lawmakers in Congress introduced the “No Tax on Tips Act” in July.
Trump and Harris outlined plans to help American working families, discussing expanding child tax credits.
Harris has talked about a significant expansion of child tax credits. She announced an economic plan that includes raising the child tax credit to $3,600 and providing subsidies of up to $6,000 for families with newborns. She also mentioned expanding the earned income tax credit for taxpayers with unclaimed children.
During her vice presidency, Harris worked behind the scenes in Congress to advocate for Biden’s proposals to establish national paid family leave, universal pre-K education, and invest billions of dollars in childcare to ensure families do not spend more than 7% of their income.
The Trump campaign team is considering expanding the child tax credit to $5,000.
During his first campaign, Trump proposed paid parental leave, but faced criticism as his proposal excluded fathers. Once in office, the former president sought $10 billion for childcare and developed the parental leave policy under the urging of his eldest daughter and policy advisor, Ivanka.
Congress rejected both proposals, but Trump successfully doubled the child tax credit and established paid leave for federal employees.
However, he did not propose a plan in his second term to reduce childcare costs.
Additionally, during the campaign, Trump also called for not taxing Social Security income. The future of Social Security has been a hot topic this election season, largely due to concerns about how the program and its related programs will be funded in the coming years.