Vice President Kamala Harris will propose a $50,000 tax break for new small businesses, a campaign official said. The Democratic presidential candidate plans to lay out her economic policy vision in preparation for next week’s debate with former President Donald Trump.
The new tax plan, part of a broader effort to boost entrepreneurship, would vastly expand an existing $5,000 deduction for start-ups, said the official, who shared the plan with reporters on condition of anonymity because it had not yet been made public. Harris sees the measure as a way to create a contrast between economic policy and Trump, who has called for cutting the tax rate paid by corporations and maintaining lower tax rates for high-income earners, along with other policies aimed at helping lower- and middle-class taxpayers.
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The proposal is expected to be unveiled ahead of a campaign speech by Harris on Wednesday in New Hampshire. Harris campaign advisers have also discussed including plans to strengthen the safety net, such as through expansions of child care or paid leave, alongside tax proposals, though it is unclear whether those or other policies will be included in Wednesday’s announcement, two other people familiar with the matter said. The people spoke on condition of anonymity to discuss details that have not yet been made public.
The plans will help sharpen Harris’ vision for economic policy as her team tries to mount a presidential campaign at breakneck speed since President Joe Biden dropped out of the race. Harris has largely called for maintaining the general direction of Biden’s policies, which have embraced a more aggressive role for federal intervention in the economy than his recent Democratic predecessors have supported. Her first set of economic policy proposals, released last month, struck a populist tone, calling for large new housing subsidies, a $6,000 child allowance for newborns and the first federal ban on predatory pricing in the grocery and food retail sectors.
The new focus on small businesses and entrepreneurs is likely intended in part to reassure voters who think Harris is too liberal. In addition to the $50,000 tax deduction, Harris proposes creating a new standard deduction for small businesses to speed up their tax filings, lowering barriers to professional licensing and authorizing incentives for state and local governments to make it easier to form start-ups, among other changes, the campaign official said.
While aid to small businesses and startups has been well-received, policymakers have long struggled with how to pass policies to encourage their growth. Aside from cash grants to new businesses, providing tax deductions often has limited impact, since companies typically have limited tax liability in their early years. Conservatives are also likely to see targeted measures as open to manipulation by larger companies. Harris’ plan would also allow new businesses to wait to claim the deduction until they first turn a profit.
The plan did not come with an estimated price tag. Harris’ first set of economic plans was estimated by independent budget analysts to cost about $1.7 trillion over 10 years.
“Small business and entrepreneurship are politically attractive, so it makes sense that Harris would focus on them as part of her advocacy for an opportunity economy,” said Tobin Marcus, head of U.S. policy and politics at Wolfe Research and an economic policy fellow to Biden during the Obama administration. “But in practice, targeted federal policies to help small businesses are often quite small.”
A Harris campaign spokesman declined to comment on the upcoming package, the exact contents of which remain unknown. Harris’ campaign also released an ad Tuesday, its fourth focused on the economy, attacking Trump for wanting to give tax cuts to corporations.
About 62 million American workers are employed by a “small business,” generally defined as having 500 employees or fewer. The White House has touted record numbers of new business filings during the first three years of the Biden administration, with Black and Latino business ownership growing at the fastest pace in more than a decade. The administration has taken credit for this small business boom, though the rise of remote work during and after the pandemic likely played a significant role as well. Harris’ campaign said her small business proposals aim to generate 25 million new business filings in her first term, up from the record 19 million seen so far during the Biden administration.
“The United States is in the midst of an unprecedented boom in small businesses and startups that no one saw coming,” said John Lettieri, president and CEO of the Economic Innovation Group, an independent policy organization. “There has been virtually nothing done by any policymaker to harness it and keep it going.”
Lettieri added that increasing the start-up deduction is unlikely to substantially increase the number of start-ups, because the federal tax bill is not a determining factor in whether a new business is formed.
A report from the Congressional Research Service found that the current deduction costs about $200 million annually.
Republicans have assailed the Biden administration’s record on business, arguing that regulatory pressures through various federal agencies have stifled innovation and growth. Trump’s 2017 tax cuts slashed the corporate tax rate from 35 percent to 21 percent while also cutting individual rates and doubling the standard deduction that most taxpayers pay. Trump has talked about cutting the corporate tax rate again to as much as 15 percent. The 2017 law also created a 20 percent deduction for what are known as S corporations — many of which are small businesses — that pass along their business income to individuals, which expires in 2025.
“If Americans want more money in their pockets, the only option is to vote for President Trump,” Trump’s campaign said in a statement Sunday.
It’s unclear whether the upcoming policy announcement will spell out Harris’s overall vision for the nation’s tax code. Harris’ campaign has previously told reporters that she supports the roughly $5 trillion in tax plans in the White House budget. Some outside advisers to the campaign have called on Harris to include versions of the billionaires’ tax and higher corporate taxes that Biden previously endorsed.
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