Presidential candidates often introduce new tax proposals as part of their campaign platforms, often promising to ease the financial burden on taxpayers. This year, the plans of rivals Kamala Harris and Donald Trump could affect voters’ paychecks in very different ways.
Former President Donald Trump is reportedly seeking to extend tax cuts enacted through the Tax Cuts and Jobs Act, his signature 2017 legislation that cut taxes for most Americans, though research has shown the top earners received the biggest benefits. He also proposes to taxes on tips and further Income from social securitywhile corporate taxes are also reduced.
Vice President Harris has proposed more generous tax benefits for familiesand raising corporate taxes to offset spending on larger tax breaks.
The two proposals reflect different visions of how best to support American families and spur economic growth. On the one hand, Trump’s plan would provide tax cuts for all income groups, but the biggest winners would be higher-income Americans. The biggest benefits under Harris’ plan would go to the lowest-income Americans, while she would raise taxes on the highest-income households.
“It’s true that Trump appears to be a winner for everyone, but he will deliver much larger benefits to the richest 1% and the richest 0.1%, while Harris will be a negative for those people,” said Kent Smetters, faculty director of the Penn Wharton Budget Model, a group within the Wharton School of the University of Pennsylvania that analyzes the budgetary impact of government policies.
Ultimately, both plans would come with significant price tags, though the combination of Trump’s corporate and individual tax cuts would be more expensive, Penn Wharton predicted. He estimates his proposal would add $5.8 trillion to the federal deficit over the next decade, compared with $2 trillion for Harris’ plan.
Anna Kelly, a spokeswoman for the Republican National Committee, wrote in an email that Trump’s tax policies will “reduce deficits” and “reduce long-term debt levels” through cuts in federal spending, increased energy production and deregulation.
The Harris-Walz campaign, meanwhile, points to the Penn Wharton Budget Model analysis as evidence that Trump would create a “deficit bomb agenda.”
“The Donald Trump campaign may want to silence Donald Trump at the debate, but they cannot silence our strong economy and Trump’s disastrous agenda, which will blow the budget deficit up, raise middle-class costs by nearly $4,000 a year, and plunge our economy into recession by the middle of next year,” Harris-Walz spokesman James Singer said in an email.
“Explosive” shortage?
While Harris’ tax proposal would potentially have a smaller impact on the country’s budget deficit than Trump’s, Smetters noted that both parties would ultimately contribute to the country’s growing fiscal burden.
The federal budget deficit in fiscal year 2024 is expected to hit $1.9 trillion, the Congressional Budget Office forecast in June. That’s a 27% increase from its previous February forecast, partly because of new funding for Ukraine, Israel and other countries.
Deficits may seem abstract to many taxpayers, but at the simplest level, they show that the country is spending more than it is taking in in tax revenues. That, in turn, increases the national debt to finance the deficit. Many economists warn that this comes at a price, such as higher interest payments to service that growing debt.
“We are actually on an explosive path now,” said Smetters.
At some point, rising U.S. debt could raise doubts in capital markets about the federal government’s ability to raise taxes or cut spending enough to avoid a default on that debt, he added.
“Neither candidate is serious about addressing the big problem — the house is burning down and the candidates are fighting over the furniture,” Smetters said. “They’re just making it worse and hurting the economy.”
