According to a report from The Wall Street Journal on Tuesday, August 27, Vice President and Democratic presidential candidate Harris’s tax proposal will carry on the unfinished business of the Biden administration, aiming to raise taxes on corporations and high-income families while keeping tax rates for the majority of Americans unchanged or reduced.
While Harris has not delved deep into her tax plan yet, her campaign aides have stated that she supports President Biden’s tax hike proposal, as well as his commitment to shield families earning less than $400,000 from tax increases.
Under her plan, taxes for some high-income families would see a significant increase, with the top marginal tax rate reaching its highest point since 1986.
The wealthiest investors and company founders would face substantial capital gains taxes, a scenario they currently do not encounter under existing laws.
Earlier this month, she introduced an expanded child tax credit plan that goes beyond Biden’s agenda.
If Harris wins the election, her administration will commence challenging tax negotiations with Republicans in 2025. If Congress doesn’t take action, key provisions of the 2017 tax law will expire by the end of 2025, a scenario both parties aim to avoid.
According to the Tax Foundation, if the President and Congress take no action, by 2026, taxes for about 62% of households will increase.
Trump hopes to extend all expiring tax cut policies, totaling $4 trillion in tax cuts over ten years. He also proposes further tax cuts, lowering corporate tax rates and exempting tips and Social Security benefits from taxation.
His running mate Senator Vance from Ohio has also mentioned expanding child tax credits.
Trump plans to levy tariffs to offset some tax revenue losses, but this could also raise consumer costs.
Harris aims to address more than just the imminent expiration of tax cuts, with her campaign team endorsing all tax hike proposals in Biden’s latest budget.
Under her plan, the highest marginal tax rate for almost all types of individual income would climb to 44.6%, compared to the current lower rates (capital gains tax of 23.8%, certain business income tax of 29.6%, wage tax exceeding 39%). High earners would still pay lower rates on some of their income, but the highest marginal rates are crucial as they affect investment decisions.
Harris will adopt Biden’s plan to establish a new system for taxing unrealized capital gains of individuals with net assets exceeding $1 billion. Currently, capital gains are not taxed before asset sales and are exempt from income tax upon death, incentivizing asset holding and transfer to heirs.
Under Harris’s plan, this top income tier (about 0.01% of households) would annually pay the lower of 25% of their income or a broader definition of income, including unrealized gains.
Last week, Trump said at an event in a Las Vegas restaurant that Democrats will eventually seek to broaden the scope of taxing unrealized gains. He said, “It will soon apply to small business owners, you will be forced to immediately sell your restaurant.”
As per Harris’s provisions, capital gains for households earning at least $1 million would be taxed as ordinary income. Unrealized capital gains exceeding $5 million per person’s exemption would be taxed upon death. Family businesses, residences, and personal property would be exempt.
Companies would face a 28% tax rate, up from the current 21%, with large corporations paying a minimum tax rate of 21%, instead of the current 15%.
The RATE Coalition, including corporate groups like Target and Altria, issued a statement saying, “Vice President Harris’s campaign promise to raise the federal corporate tax rate to 28% will have devastating consequences, leading to price hikes, wage decreases, and decreased job opportunities.”
Despite their differing opinions from Trump, Harris also promises not to increase taxes on families earning less than $400,000 and to extend most of Trump’s expiring tax cut policies.
She will also restore the expanded child tax credit policies implemented in 2021, providing $3,000 for most children and $3,600 for children under 6. She will add another tier for newborns, with a value of $6,000 for that year.
While Harris’s tax proposal would change rules for capital gains at death, she has not yet specified how she intends to handle the estate tax exemption. If Congress takes no action, the current per person exemption of $13.6 million will halve by 2026.