Topline
Former President Donald Trump has unveiled two new tax plans in recent days while campaigning, targeting overseas voters and Americans paying off car loans, as both he and Vice President Kamala Harris have rolled out a variety of tax proposals in the leadup to the election.
Key Facts
Trump raised several new tax proposals over the past week, saying he would end double taxation on Americans living abroad—who still have to file a tax return even if none of their income is based in the U.S.—and allow interest on car loans to be tax deductible.
The proposals are part of a spate of tax proposals Trump has issued as Election Day has neared, along with saying he wouldn’t tax income from tips or overtime and would get rid of income tax on Social Security benefits.
Harris has floated her own suite of tax proposals, which include expanding the child tax credit, providing tax credits for first-time home buyers and developers building affordable housing, increasing taxes on corporations and top earners and echoing Trump in also calling for no tax on tips.
Middle Class And Lower-Income Americans: How Harris And Trump’s Tax Plans Would Help
Harris: The vice president has proposed an “opportunity economy” with tax plans that are designed to bolster the middle class, and has said she would not raise taxes on people earning $400,000 per year or less. Harris has called for expanding the Earned Income Tax Credit for workers in lower-income jobs, providing a tax credit of $6,000 for families with newborns in their first year and a tax credit of $3,600 per child after that for middle and lower-class families. She would also give first-time home buyers a $25,000 tax credit and would increase health care subsidies under the Affordable Care Act, which the Harris campaign estimated would save Americans an average of $700 on their health insurance premiums. The nonpartisan Tax Policy Center at the Urban Institute and Brookings Institution projected Harris’ proposals will largely benefit middle- and lower-income Americans, estimating 70% of households making $113,000 or less will benefit from the earned income tax credit expansion, child tax credit or first-time homebuyer proposal. Both Harris and Trump have also proposed to get rid of income tax on tipped income, though the Harris campaign clarified to CNN that under her plan, that income would still be subject to payroll taxes. Harris’ version of the plan would also include an income limit and guardrails to prevent people like hedge fund managers from taking advantage of the policy—a concern that Trump’s proposal has raised.
Trump: In addition to his “no tax on tips” proposal, Trump has called for eliminating income taxes on overtime wages, even though when he was president, his administration declined to defend an Obama-era policy that would have made more workers eligible for overtime pay. (The ex-president has said he “hated” paying his own employees overtime.) Trump has also called for eliminating income taxes on Social Security payments, though economists warn doing so could speed up the timeline for the program becoming insolvent. Trump’s proposal to end double taxation on U.S. citizens who live abroad would largely benefit workers earning more than approximately $120,000 per year, as workers earning less than that are eligible for a Foreign Earned Income Exclusion that keeps expatriates from being taxed twice on their income. Though Trump has proposed making car loan payments tax deductible, tax experts noted to CBS News that would likely provide little benefit to lower-income workers, since they typically don’t itemize their tax deductions, and those in higher tax brackets would receive the biggest benefit.
Impact On Billionaires: How Harris And Trump Would Hurt—and Help—the Rich
Harris: The vice president’s tax plan takes aim at the wealthiest Americans to pay for her assistance to the middle class and lower-income Americans. She has endorsed President Joe Biden’s plan to levy a 25% capital gains tax on Americans whose net worth is $100 million or more, including taxing unrealized gains. That means wealthy Americans would have to pay tax on any of their assets that appreciate in value, even if they didn’t sell those assets for a profit. Republicans and billionaires have heavily criticized that proposal, falsely claiming it would affect Americans who earn less than the $100 million income threshold. Billionaire venture capitalist Marc Andreessen has claimed the proposal would disincentivize entrepreneurs from starting businesses in the U.S., given the high taxes they could face as their companies increase in value. She has also proposed a combined 33% capital gains rate for Americans who earn more than $1 million, made up of a 28% rate on long-term capital gains—profits from assets that are held for more than a year—and a 5% rate on the net investment income tax. That 33% would be the highest rate since 1978, though it’s also lower than Biden’s proposal to raise it to a combined 44.6%.
Trump: Trump’s policies are more likely to benefit high-income earners, with the ex-president saying on Newsmax Tuesday, “You don’t tax the rich.” He is likely to extend expiring provisions of the 2017 tax law that the Brookings Institution projects will disproportionately impact the rich, with provisions that would raise the marginal tax rate for top earners and lower the tax exemption for estate taxes if they expire. He has also called for eliminating a $10,000 cap on the state and local tax deduction, which the Tax Policy Center projects would predominantly help the top 0.1% of taxpayers while providing “little or no help” to lower-income and middle-class Americans. That tax, known as SALT, allows taxpayers to claim some deductions for state and local taxes they pay, predominantly benefiting residents of states with higher taxes like New York and California.
Business And Corporations: How Trump And Harris’ Tax Plans Would Affect Tax Rates
Harris: Harris’ desire to tax the rich also extends to large corporations, as she has called for raising the corporate tax rate from 21% to 28% and raising the alternative minimum tax for corporations earning more than $1 billion from 15% to 21%. She would also increase the tax on stock buybacks, where companies purchase their own stock, from 1% to 4%. On the other end of the business spectrum, the vice president has announced a $50,000 tax credit for new small businesses—a tenfold increase from the current $5,000 credit—and has proposed tax credits for housing developers that build affordable housing for both new homeowners and renters.
Trump: Trump has promised to benefit big corporations by lowering the corporate tax rate from 21% to 15% for companies that manufacture their products in the U.S. He would also extend provisions in the 2017 tax law that benefit businesses, like a deduction for “pass-through” business entities and deductions for U.S.-based research and their investments in machinery and equipment. Trump has also proposed imposing severe tariffs on imported goods into the U.S., particularly from China, which economists project would lead companies to raise prices on those products for consumers and could result in retaliatory tariffs on goods the U.S. exports to other countries.
How Do Harris And Trump Propose Paying For Their Tax Plans?
Harris: The vice president told “60 Minutes” she intends to pay for her plans to bolster the middle class through her tax increases on the wealthy, though the Tax Policy Center projected her proposed cuts will likely outweigh the funds generated by her tax increases. Harris also would have to get those taxes on the wealthy through Congress, though she told “60 Minutes” she’s optimistic lawmakers would be willing to go along with it. “When you talk quietly with a lot of folks in Congress, they know exactly what I’m talking about, ’cause their constituents know exactly what I’m talking about.”
Trump: The ex-president has claimed he’ll use tariffs on imported goods to cover the cost of his proposals—and even floated using them to replace income taxes entirely—which the Peterson Institute for International Economics estimates would generate approximately $225 billion per year at most and could not replace the $2 trillion generated by individual and corporate income taxes. Coupling income taxes with tariffs would also disproportionately hurt lower-income Americans, the organization projects, as they pay less in taxes than richer households—and would thus see less of a benefit from tax cuts—but would still be hurt just as much by the price increases on imported goods that would likely result. When asked Sunday by Fox News host Maria Bartiromo about the price of his economic plans, Trump claimed the cost would be offset because “you’re gonna have car companies coming back to the country because of the taxes and the tariffs.”
How Much Would These Proposals Cost?
The nonpartisan Committee for a Responsible Federal Budget projected both candidates’ plans—including both their tax plans and other proposals—would increase the federal deficit. Harris’ agenda would add approximately $3.5 trillion to the deficit, the group estimated, with the impact ranging from not impacting the deficit at all to adding $8.1 trillion. Trump’s plan would be costlier, adding approximately $7.5 trillion to the deficit but potentially ranging anywhere from $1.5 trillion to $15.2 trillion.
What Would Project 2025 Do About Taxes?
Democrats have associated Trump’s campaign with Project 2025, a policy blueprint proposing a total overhaul of the executive branch if Trump’s elected, even though Trump has distanced himself from the proposal and the Heritage Foundation, which crafted it, as the agenda garnered criticism. While Trump is not obligated to follow its proposals if he’s elected, Project 2025 calls for a baseline tax rate of either 15% or 30% depending on income—with 30% applying “at or near the Social Security wage base,” which in 2025 will be $176,100. It will also eliminate most tax deductions and tax credits, and would reduce the corporate tax rate to 18%. The plan has been criticized for primarily benefiting wealthier Americans, as it would raise the tax rate for people making less than $50,000 annually, and lower the tax rate for Americans making more than approximately $200,000, who now pay more than 30% in taxes.
What We Don’t Know
How much of either candidates’ plans would bet enacted if they’re elected. While Harris has expressed optimism she’d be able to get her plans through Congress, many Republicans are probably unlikely to support tax cuts on their wealthy supporters and corporations, and may try to obstruct her administration from getting its proposals through. Trump may also face similar obstacles from Democratic lawmakers if he takes the White House. Republican strategist Liam Donovan, who isn’t affiliated with Trump, suggested to Reuters the ex-president’s slew of last-minute tax proposals are aimed more at winning over voters than substantive policy plans, noting the ex-president is a “salesman at heart.” “One of his advantages in sales, as in politics, is that he’s unencumbered by shame or consistency or policy details,” Donovan said. “In this case, Trump is trying to close a deal, and the spate of policy proposals are a bid to give the customer what they want.”
Chief Critic
Billionaire and onetime presidential candidate Michael Bloomberg criticized both candidates’ tax proposals in an op-ed for Bloomberg on Thursday, claiming the policies are “setting new standards for shamelessness” and that bringing the national debt “back under control” and investing in government programs will require “more broad-based tax increases than either campaign is willing to acknowledge.” The former New York City mayor took particular issue with Trump’s proposals, criticizing his “almost boundless” list of “vaguely described tax cuts” and describing his plan to replace that income with tariffs as a “recipe for disaster.” While Harris’ plans are “a model of fiscal probity” compared to Trump, they’re also “problematic,” Bloomberg argued, claiming her plans to raise taxes on the wealthy would still “[leave] her trillions short” in covering the cost of her proposed tax cuts and credits.
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