US presidential candidates routinely present new tax proposals as part of their campaign platforms, often promising to ease the financial burden on taxpayers. This year, the plans put forward by their rivals Kamala Harris and Donald Trump could have very different effects on voters’ paychecks.
Former President Donald Trump is reportedly seeking to extend the tax cuts enacted by the Tax Cuts and Jobs Act, his landmark 2017 law that lowered taxes for most Americans, though research showed the richest received the biggest benefits. He also proposes to eliminate tip taxes and on Social Security Incomewhile lowering the corporate tax rate.
Vice President Harris has proposed introducing more generous tax benefits for familiesas well as increasing the corporate tax rate to help offset the costs associated with the larger tax credits.
The two proposals reflect different views on how best to support American families and boost economic growth. On the one hand, Trump’s plan provides tax cuts for all income groups, but the biggest winners will be the highest-income Americans. Harris’ plan would see the biggest benefits go to the lowest-income Americans, while she would raise taxes on the wealthiest households.
“It’s true that Trump seems to be the winner for everyone, but he’s going to give much bigger gifts to the top 1 percent and the top 0.1 percent, whereas Harris is going to be negative for those people,” said Kent Smetters, faculty director of the Penn Wharton Budget Model, a group at the Wharton School of the University of Pennsylvania that analyzes the budgetary impact of government policies.
Ultimately, both plans would be expensive, although the combination of Trump’s corporate and personal tax cuts would prove more costly, according to Penn Wharton. Its proposal would add $5.8 trillion to the federal deficit over the next decade, compared with $2 trillion for Harris’ plan, the agency said.
In an email, Republican National Committee spokeswoman Anna Kelly said Trump’s tax policy would “reduce deficits” as well as “lower long-term debt levels” through federal spending cuts, increased energy production and deregulation.
Meanwhile, the Harris-Walz campaign points to Penn Wharton’s budget model analysis as evidence that Trump would create a “deficit bombing program.”
“The Trump campaign may want to silence Donald Trump at the debate, but they cannot silence our strong economy and Trump’s disastrous agenda that will explode the deficit, raise middle-class costs by nearly $4,000 a year, and send our economy into a recession by the middle of next year,” Harris-Walz spokesman James Singer said in an email.
An “explosive” deficit?
While Harris’ tax proposal would potentially have a smaller impact on the nation’s deficit than Trump’s, Smetters noted that both parties would end up adding to the nation’s growing tax burden.
The federal budget deficit for fiscal 2024 is projected to reach $1.9 trillion, the Congressional Budget Office projected in June. That’s a 27% increase from the February forecast, partly due to 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 collects in tax revenue. That, in turn, increases the national debt to finance the deficit. Many economists warn that this comes at a cost, such as higher interest payments to service that growing debt.
“We’re basically on an explosive path right now,” Smetters said.
At some point, the soaring U.S. debt could sow doubt in financial markets about the federal government’s ability to raise taxes or cut spending enough to avoid defaulting on that debt, he added.
“None of the candidates are taking the major problem seriously: the house is burning down and the candidates are arguing over furniture,” Smetters said. “They’re just making it worse and hurting the economy.”
