Economic themes, socioeconomic priorities and associated tax proposals
Harris proposed the following to expand affordable housing in response to higher rental prices and other housing costs:
- Provide a new tax incentive for homebuilders who build starter homes sold to first-time homebuyers
- Provide up to $25,000 down-payment support for first-time (and certain other) homeowners
- Expand an existing tax incentive for businesses that build affordable rental housing
- Create a new $40 billion innovation fund intended to spur innovative housing construction among local governments
Observation:These proposals closely track, and in some cases expand, those of President Joe Biden’s provisions around affordable housing. As part of the proposal, Harris also urges Congress to take action on pending rental-assistance measures, such as the Stop Predatory Investing Act, which would eliminate key tax benefits for investors who acquire a large inventory of single-family homes.
Harris proposed the following tax breaks for families:
Restore and make permanent the child tax credit. Harris would reinstate the American Rescue Plan Act’s more generous version of the child tax credit (i.e., an increase from $2,000 to $3,600 per child), which was effective only for 2021. Harris would also expand the credit to provide up to a $6,000 credit for the first year of a child’s life.
Observation: President Biden and Congressional Democrats have been unsuccessful in advancing changes to the child tax credit in the current Congress, despite a bipartisan compromise overwhelmingly approved by the House earlier this year in the currently-stalled Tax Relief for American Families and Workers Act. A key obstacle has been the cost of extending the provision, as well as certain provisions included in the negotiated measure, such as the income look back proposal, which was opposed by a number of Senate Republicans.
Observation: Even at the maximum $3,600 amount, Harris’s proposal would be less than the $5,000 per child amount recently proposed by Republican Vice President candidate J.D. Vance.
Enhance the Earned Income Tax Credit. Looking again to the American Rescue Plan Act as a blueprint, Harris would resurrect that measure’s version of the Earned Income Tax Credit, which provided (for 2021 only) a $1,500 maximum credit for workers without children.
Other notable proposals include:
Ensure more Americans are covered by health insurance
As part of an effort to ensure more Americans are covered by health insurance, Harris would extend the favorable Affordable Care Act insurance premium subsidies that were enacted by the American Rescue Plan. The Inflation Reduction Act extended these provisions until the end of 2025.
Address rising food prices
To address rising food prices, Harris proposed a federal ban on price gouging, focusing on “excessive” price increases and “unfair mergers and acquisitions that give big food corporations the power to jack up food and grocery prices.” It is unclear, however, how this provision would be enforced.
Taxes on tips
Interestingly, the document does not address eliminating taxes on tips, which both Harris and former President Donald Trump have addressed on the campaign trail.
Under Harris’ proposal, tips would remain subject to payroll taxes, while Trump’s proposal would eliminate both federal income and payroll taxes. According to an estimate by the nonpartisan Committee for a Responsible Federal Budget (CRFB), the cost of Trump’s proposal to eliminate both federal income and payroll taxes on tips would lower revenue by $150 billion to $250 billion over 10 years. Conversely, eliminating just the federal income tax on tips would lower revenue by approximately half of that amount, according to CRFB estimates.
Corporate income taxes
In a media statement on Aug. 19, Harris announced that she supports increasing the corporate income tax rate from 21% to 28%. A similar proposal was included in President Biden’s FY25 Budget.
Tax Cuts and Jobs Act
With respect to the expiration in 2025 of the individual tax relief provisions of the TCJA, Harris did not provide any further insights into her thinking, other than pledging to adhere to President Biden’s position to not increase taxes on those earning less than $400,000 a year.
Also left vague are her intentions regarding TCJA changes that have already happened (e.g., elimination of research and experimentation expensing, phase down of 100% bonus depreciation, a more stringent calculation of the business interest deduction limitations), and changes that are scheduled in 2025 for certain international tax provisions (e.g., GILTI, FDII and BEAT). Those international provisions will become particularly important in light of ongoing Organisation for Economic Co-operation and Development activity on Pillar 1 and Pillar 2, which will carry over into 2025 and will need to be addressed by whoever is in the White House.
Harris, along with all congressional Democrats, voted against the TCJA in 2017. When Harris was a senator in 2018, she proposed a tax bill that included repealing the TCJA, with the exception of provisions that provide relief to taxpayers with less than $100,000 in annual income. When seeking the presidential nomination in 2019, Harris issued a social media post that indicated her intention to “reverse” the TCJA if elected. Whether or not this continues to be Harris’ position, her prior statements should be viewed in the context of her pledge to not raise taxes on those earning less than $400,000.
Observation: An outright repeal of TCJA would portend significant tax changes across the spectrum, including reversion to a top 35% corporate tax rate. As discussed below, Harris has indicated her support for a top corporate tax rate of 28%.
Revenue impact
Harris’ economic agenda is silent on the revenue impact of the proposals. The CRFB has estimated that the provisions would increase deficits by $1.7 trillion over a decade (partially offset by $250 billion in prescription drug savings.)
Similarly absent from the document is whether such costs would be offset, or paid for, other than a statement reiterating alignment with President Biden’s position that the wealthiest Americans and largest corporations should “pay their fair share.”
Following the release of her economic plan, the Harris campaign announced her support for increasing the corporate tax rate from 21% to 28%. If enacted, that would increase federal tax receipts by between $1 trillion and $1.4 trillion over a 10-year period. And while Harris has generally supported the revenue raising provisions that were included in President Biden’s proposed FY25 budget, it is unclear which proposals Harris would favor other than increasing the corporate tax rate.
Next steps
Since President Biden withdrew from the presidential election on July 21, the path forward on tax policy has been thrown into further uncertainty.
Vice President Harris’ emergence as the presidential nominee for Democrats has placed scrutiny on where she currently stands on key issues. Other than statements Harris made on the campaign trail, certain actions she took while serving in Congress, and proposals that were part of her 2019 presidential nominee platform, there has been very little detail as to her preferred priorities. Her release of an economic agenda and her announced support for a 7% increase in the corporate income tax rate mark the first steps toward gaining a deeper understanding of the path forward.
It will be vitally important for taxpayers to monitor these developments and determine potential impacts and implications. RSM US LLP’s Washington National Tax and Tax Policy team members are actively monitoring developments and will issue additional insights as warranted.
