Working Capital

In U.S. politics, tax policy often becomes a critical issue for defining economic priorities and future plans.Vice President Kamala Harris and former President Donald Trump have each championed tax policies that reflect the economic ideologies of their political parties. Their individual views tend to differ drastically.However, ahead of the 2024 general election, both Harris and Trump have come out saying they support the removal of taxes on tips for workers in the service industry.What are the points where they disagree? Here’s the breakdown:Kamala Harris’ tax policy: Taxing corporations to support the middle classHarris aligns with progressive tax policies that aim to reduce income inequality by shifting a greater tax burden onto wealthy individuals and corporations.Her stance is similar to that of President Joe Biden, under whose administration several tax proposals have been advanced that Harris supports.According to U.S. News and World Report, a cornerstone of Harris’ policy is raising the corporate income tax rate from 21% to 28%. This ensures that businesses, especially large corporations, contribute a larger share of federal revenue. Harris and her running mate, Minnesota Gov. Tim Walz, believe that these tax increases on the wealthy and corporations will fund critical public services, such as infrastructure, education and health care.Harris has also proposed increasing the Medicare tax from 3.8% to 5% for people making more than $400,000. This includes raising the top individual tax rate from 37% to 39.6%. Additionally, Harris advocates for increasing the capital gains tax rate for those earning more than $1 million annually, aiming to close the gap between how investment income and wage income are taxed.Harris also supports measures to expand the child tax credit to $3,600 for children aged 2-5, $3,000 for children 6-17, and $6,000 for a childs first year. This credit provides significant financial relief to middle- and lower-income families.Harris and Walz also plan to provide $25,000 down payment assistance to qualifying first-time homebuyers and increase the $5,000 tax deduction for small business startup costs to $50,000.Donald Trumps tax policy: Cutting taxes to boost businessesDonald Trump’s tax policies, in contrast, are rooted in Republican principles that emphasize lower taxes, particularly for businesses and high-income earners, with the belief that such cuts spur economic growth. His signature legislative achievement, the Tax Cuts and Jobs Act (TCJA) of 2017, slashed the corporate tax rate from 35% to 21% and reduced individual income tax rates across most brackets.His 2024 campaign with running mate JD Vance builds off of plans from his previous presidency. Trump and Vance have proposed ending taxes on Social Security benefits and imposing a 10%-20% tariff on most imported goods and a 60% tariff on goods imported from China. U.S. News and World Report clarifies that a tariff is a tax on imported goods and is typically used to encourage consumers to buy products made domestically.What policy outcomes could look like The tax policies advocated by Kamala Harris and Donald Trump reflect starkly different economic ideologies. Harris’ focus is on redistributing wealth to reduce inequality and support middle-class families, while Trump prioritizes tax cuts to incentivize business investment.The Republican plan with Trump would “would increase primary deficits by $5.8 trillion over the next 10 years,” according to the Penn Wharton Budget Model. The same budget model reports that Harris plan would “increase primary deficits by $1.2 trillion over the next 10 years.”