Harris vs. Trump Tax Plans: 2024 Presidential Election

Harris vs. Trump Tax Plans: 2024 Presidential Election

By: Jarrod Galassi

 Updated October 22, 2024

Since our last article comparing the presidential candidates’ tax platforms, each nominee has released updates to their tax policy platforms for individual and business taxpayers alike. We will continue to update this article as the candidates announce new details on their tax policy stances up until the election.

Kamala Harris (D)

Vice President Kamala Harris has recently announced her tax proposals since we last published our initial comparison on the presidential campaign policy positions.

Individual Income Tax:

1. Increase the top marginal tax rate to 39.6% on income over $400,000 for single filers and $450,000 for joint filers
2. The temporary provisions of the Tax Cuts and Jobs Act (TCJA) would be extended for taxpayers earning less than $400,000
3. Increase the net investment income tax to 5% on income over $400,000
4. Net investment income would include nonpassive income
5. Tips earned by workers would be exempt from income tax

Capital Gains and Qualified Dividends

1. Long term capital gains and qualified dividends would be taxed at ordinary income tax rates when taxable income exceeds $1 million
2. Unrealized capital gains above $5 million would be taxed upon death ($10 million for joint filers)
3. Carried interest would be taxed at ordinary income rates

 Tax Credits:

1. Increase the child tax credit to $6,000 for newborns, $3,600 for children aged 2-5, and $3,000 for children aged 6-17
2. Increase the earned income tax credit (EITC) for workers without children
3. Provide a $25,000 tax credit for first time homebuyers over four years
   
   

Corporate and Business Income Tax Provisions:

1. Increase the corporate income tax rate to 28%
2. Global intangible low-taxed income (GILTI) would be taxed at an increased rate of 21%
3. Increase $5,000 start-up deductions to $50,000

 Excise Taxes:

1. Increase stock buyback excise tax to 4%

Analysis of Harris’ Platform to Taxpayers:

Taxpayers who are higher earners, typically defined by the campaign as taxpayers earning above $400,000 per year, may see an increase in their tax liability through a handful of her policies. The increase to the top marginal tax bracket would restore the marginal tax rates to their pre-TCJA levels. Harris’ proposed changes to the net investment income tax would also see increased tax revenues by not only increasing the rate from 3.8% to 5%, but also including nonpassive income within the definition of investment income.

Families and first time homebuyers would see potential relief through the Democratic nominee’s policies, however. The enhancement of the child tax credit of $6,000 for newborns would triple the amount of the credit for parents in the first year. Her proposal of a $25,000 tax credit for first time homebuyers would also provide assistance and make it easier for people to become homeowners.

The corporate tax policies Harris brings to the table are among the strongest changes we see from her campaign. The increase of the corporate income tax rate to 28% will have an impact on those businesses formed as a C-corporation. We may expect to see some of the businesses that converted to a C-corporation at the start of TCJA, may decide to revert back to a passthrough structure, especially if the QBI deduction remains in place.

Donald Trump (R)

Former President Donald Trump enacted sweeping tax reform legislation in 2017 through the Tax Cuts and Jobs Act (TCJA). His campaign’s current tax policies have remained consistent from our initial comparison, although his campaign has announced a few new updates to his position.

Individual Income Tax:

1. Expiring provisions of TCJA would become permanent
2. $10,000 state and local tax deduction cap would be eliminated
3. Proposals to offset personal income taxes with increased tariffs
4. Tips and overtime pay earned by workers would be exempt from income tax
5. Exempt Social Security benefits from income tax
   
   

Corporate Income Tax:

1. Decrease corporate income tax rate to 20%, with a preferential 15% rate for corporations who produce goods domestically
   
   

Excise Taxes:

1. Tax large private university endowments
   

Analysis of Trump’s Platform to Taxpayers:

Former President Donald Trump enacted the first major tax legislation update during his term in office, so it is not unexpected that his campaign does not offer up many policy changes in comparison to elections we’ve seen the past. The topics his campaign has brought into the conversation, however, are in the same spirit as many of the provisions within TCJA.

Trump is campaigning on eliminating both overtime pay and Social Security benefits from income tax. This would undoubtedly provide sizable benefits to many segments of the population including hospitality workers, retirees, and all non-exempt employees.

Trump’s proposal to further reduce the corporate income tax rate highlights a very business-friendly position to domestic corporations.

In order to offset the drop in tax revenues from the above changes, the Trump campaign is proposing a universal baseline tariff of 10-20% on all imports, which would increase up to 60% for imported goods from China. Many of the income tax savings corporate and individual taxpayers may see could largely be offset by the increase in consumer goods.

Source: Tax Foundation