Tax Policy - A Key Battleground in the 2024 Presidential Race

Early voting for the 2024 election is underway in several states, but many voters are still looking for more details about the candidates' platforms, especially regarding their tax policies. Gathering this information can be challenging, with new proposals frequently emerging. Below is an overview of some key tax-related plans from both former President Donald Trump and Vice President Kamala Harris.

Many of the provisions in the TCJA are scheduled to expire after 2025, including the lower marginal tax rates, increased standard deduction, and higher gift and estate tax exemption. Trump would like to make the individual and estate tax cuts permanent and cut taxes further but hasn’t provided any specifics.

As a senator, Harris voted against the TCJA but recently said she won’t increase taxes on individuals making less than $400,000 a year. This means that she would need to extend some of the TCJA’s tax breaks. She has endorsed President Biden’s 2025 budget proposal, which would return the top individual marginal income tax rate for single filers earning more than $400,000 a year ($450,000 for joint filers) to the pre-TCJA rate of 39.6%.

Harris has also proposed increasing the net investment income tax rate and the additional Medicare tax rate to reach 5% on income above $400,000 a year.

Trump has proposed to decrease the corporate tax rate from its current 21% to 20% (or even lower for companies making products in America). In addition, he’d like to eliminate the 15% corporate alternative minimum tax (CAMT) established by the Inflation Reduction Act. On the other hand, Harris proposes raising the corporate tax rate to 28% — still below the pre-TCJA rate of 35%. She has also proposed to increase the CAMT to 21%.

In addition, Harris has proposed to quadruple the 1% excise tax on the fair market value when corporations repurchase their stock, to reduce the difference in the tax treatment of buybacks and dividends. She would block businesses from deducting the compensation of employees who make more than $1 million, too.

In another proposal, Harris said she’d like to increase the current $5,000 deduction for small business startup expenses to $50,000. The proposal would allow new businesses to allocate the deduction over a period of years or claim the full deduction if they’re profitable.

Trump has proposed to eliminate income and payroll taxes on tips for restaurant and hospitality workers. He also recently proposed excluding overtime pay from taxation and, in another proposal, said he would like to exclude Social Security benefits from taxation.

Harris has proposed exempting tips from income taxes. Her proposal also includes provisions to prevent wealthy individuals from restructuring their compensation to avoid taxation — by, for example, classifying bonuses as tips.

Trump’s running mate, Senator J.D. Vance, has proposed a $5,000-per-child Child Tax Credit (CTC). However, it’s unclear if Trump endorses the proposal.

Harris has proposed boosting the maximum CTC from $2,000 to $3,600 for each qualifying child under age six, and $3,000 each for all other qualifying children. She would increase the credit to $6,000 for the first year of life. Harris also favors expanding the Earned Income Tax Credit and premium tax credits that subsidize health insurance.

Harris proposes taxing unrealized capital gains (appreciation on assets owned but not yet sold) for the wealthiest taxpayers. Individuals with a net worth exceeding $100 million would face a tax of at least 25% on their income and their unrealized capital gains.

Harris is also calling for individuals with taxable income exceeding $1 million to have their capital gains taxed at ordinary income rates, rather than the current highest long-term capital gains rate of 20%. Unrealized gains at death also would be taxed, subject to a $5 million exemption ($10 million for married couples) and certain other exemptions.

Trump has alluded to possible tax incentives for first-time homebuyers but without any specifics. The GOP platform calls for reducing mortgage rates by slashing inflation, cutting regulations and opening parts of federal lands to new home construction.

Harris proposes new tax incentives intended to address housing concerns. Among the proposals, she would like to provide up to $25,000 in down-payment assistance to families that have paid their rent on time for two years. She’s also proposed more generous support for first-generation homeowners. In addition, she proposes a tax incentive for homebuilders that build starter homes for first-time homebuyers.

Trump repeatedly has called for higher tariffs on U.S. imports. He would impose a baseline tariff of 10%, with a 60% tariff on imports from China. (In speeches, he’s proposed a 100% tariff on certain imported cars.)

Trump has also suggested eliminating income taxes completely and replacing that revenue through tariffs.

Whichever candidate prevails in November will likely include tax policy changes among their immediate priorities. However, both sides are likely to face an uphill battle as those tax changes make their way through Congress, who will ultimately have to approve any legislation before it can be enacted.

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