Harris, Trump tax proposals: Who wins, who loses?

Eighty-one percent of voters say the economy is very important in the upcoming presidential election, according to Pew Research. “The economy” encompasses several areas where a president does and does not have direct influence, but economic policies are nonetheless a key part of any presidential campaign platform, starting with taxes.

“The proposed policies by both presidential candidates are essentially targeting families of different incomes,” said Armine Alajian, CPA. Alajian said former President Donald Trump’s proposals would result in “overall lower taxes for the wealthy,” while Vice President Kamala Harris has a “focus on providing tax relief for lower-income families.”

The president alone doesn’t set tax policy and would depend on friendly majorities in Congress to make their plans a reality.

Still, tax policies are central to the Harris platform, which focuses on economic opportunity and middle-class taxes and costs. The Trump platform is lighter on specifics, as the campaign and the GOP have instead focused on curbing immigration and expanding deportation. But Trump himself and running mate J.D. Vance have floated tax policy ideas on the campaign trail that analysts have weighed in on.

Harris tax proposals

Harris focuses on two pillars: lowering taxes for middle- and low-income earners, and raising taxes on the wealthy and corporations.

For middle- and low-income earners, she proposes:

• Expanding the Earned Income Tax Credit to cover more workers, raising the income limit and increasing the amount from $600 to $1,500. The EITC is an existing credit available to workers earning less than $63,000 a year.
• Expanding the Child Tax Credit, which is currently $2,000 per child per year. Harris proposes increasing it to $3,600 for children ages 2 to 5, $3,000 for children ages 6 to 17 and a one-time credit of $6,000 for newborns.
• Extending the 2017 Tax Cuts and Jobs Act deductions for workers who earn less than $400,000 per year. The TCJA changes are otherwise set to expire at the end of 2025.
• Eliminating taxes on tips.
• Providing up to $25,000 down payment assistance for first-time homebuyers and more for first-generation homebuyers. It’s not proposed as a tax credit for now, but it builds off of similar Biden-era proposals including a First-Time Homebuyer Tax Credit.
• Expanding the startup expense tax deduction for new businesses from $5,000 to $50,000, applied over multiple years.

Of Harris’ headline proposals — the down payment assistance and business startup deduction — Javier Palomarez, founder and CEO at United States Hispanic Business Council, said, “These proposals are ideal on paper, but in reality, the impact may be limited.”

Because the startup deduction would be realized over several years, he said, the $50,000 is less impactful than it sounds. And Palomarez is concerned home-buying assistance could overwhelm an already strained housing market. Harris proposes mitigating that by assisting local governments in building more affordable housing faster and penalizing private equity firms that hoard available properties to keep prices high.

For the highest earners, Harris proposes:

• Increasing the top tax rate to 39.6% (up from 37% under the Tax Cuts and Jobs Act).
• Supporting Biden’s proposed “billionaire tax,” which would set a 25% minimum tax rate for those with $100 million or more in wealth.
• Increasing the long-term capital gains tax to 28% (up from 20% under the Tax Cuts and Jobs Act) for those earning $1 million or more per year.
• Eliminating tax loopholes for the wealthiest investors by changing policies around back-door Roth IRA conversions and unrealized capital gains.

Trump tax proposals

Of the 20 “core promises” listed in the Trump/GOP platform, one mentions taxes, promising “large tax cuts for workers and no tax on tips.”

The Republican National Committee further promises promoting homeownership through unspecified tax incentives and making the Tax Cuts and Jobs Act tax code changes permanent. Those provisions are currently active and include:

• Top income tax rate of 37%.
• Doubled standard deduction, which eliminates the need for many workers to itemize deductions and decreases taxable income for many.
• Child Tax Credit of $2,000 (which the Tax Cuts and Jobs Act raised from $1,000).
• Top capital gains tax rate of 20%.
• Reduced estate taxes.

Trump and Vance have mentioned potential tax proposals throughout their campaign.

• Trump said in a social media post that he would “get SALT back.” Republicans in high income-tax states like New York and California interpreted this to mean he favors their requests to lift a cap on the federal tax deduction for state and local taxes paid.
• Vance said on CBS News’ “Face the Nation” he favors increasing the Child Tax Credit to $5,000 per child. He recently sat out a Senate vote to expand the credit.
• In a private meeting, Trump floated an all-tariff policy that would eliminate income taxes for all workers. Experts warn it would effectively raise tax costs for lower-income earners.
• Trump posted on social media that “seniors should not pay tax on Social Security,” indicating support for eliminating federal income tax on Social Security benefits.
• Trump said at a campaign event in Arizona that “your overtime hours will be tax-free,” suggesting another income-tax exemption.

“Trump's policies are, overall, a mixed bag,” said Palomarez. “While small businesses and American families alike would benefit from tax breaks…Trump’s proposals regarding tariffs and mass deportation are counterproductive to his business-friendly approach.”