Presidential candidates generally make new tax proposals part of their campaign platforms, often promising to help reduce the financial burden on taxpayers. This year, the plans emerging from rivals Kamala Harris and Donald Trump could affect voters’ paychecks in different ways.
Former President Donald Trump will seek to extend tax cuts passed through the Tax Cuts and Jobs Act, the 2017 law he signed that cut taxes for most Americans, despite research. has been shown top earners receive the biggest benefits. He also proposed to eliminate it tax on tips and on Social Security Incomewhile also lowering corporate tax rates.
Vice President Harris has proposed introducing more generous tax benefits for familiesas well as a rise in corporate tax rates to help offset spending from larger tax credits.
The two proposals reflect different views on how best to support U.S. families and promote economic growth. On the one hand, Trump’s plan will provide tax cuts for all income groups, but the biggest winners will be higher-income Americans. The biggest gains under Harris’ plan would go to the lowest-income Americans, while he would raise taxes on the highest-income households.
“It’s true that Trump appears to be a winner for everyone, but he will give a bigger prize to the 1% and the top 0.1%, while Harris will be negative for these people,” said Kent Smetters, director of the Penn Wharton faculty. Budget Models, a group at the University of Pennsylvania’s Wharton School that analyzes the budgetary impact of government policies.
Ultimately, both plans will come with a significant price tag, although the combination of Trump’s tax cuts for corporations and individuals will be more expensive, Penn Wharton predicts. It estimates that the proposal would add $5.8 trillion to the federal deficit over the next decade, compared to $2 trillion for the Harris plan.
In an email, Republican National Committee spokeswoman Anna Kelly said Trump’s tax policy would “shrink the deficit” as well as “reduce long-term debt levels” through federal spending cuts, increased energy production and deregulation.
The Harris-Walz campaign, meanwhile, pointed to Penn Wharton’s Budget Model analysis as evidence that Trump would create a “deficit bomb agenda.”
“Donald Trump’s campaign may want to silence Donald Trump on the debate stage, but they can’t silence the strong economy and Trump’s disastrous agenda that will explode the deficit, increase the cost of the middle class by almost $4,000 a year, and send our economy sick into a recession in middle of next year,” Harris-Walz spokesman James Singer said in an email.
An “exploding” deficit?
Although Harris’ tax proposal has the potential to have a smaller impact on the national deficit than Trump, Smetters noted that both parties will ultimately increase the country’s fiscal burden.
The federal budget deficit in fiscal year 2024 is expected to be $1.9 trillion, the Congressional Budget Office forecast in June. This represents a 27% increase from the previous February forecast, due in part to new funds given to Ukraine, Israel and other countries.
A deficit may seem abstract to many taxpayers, but at the simplest level it shows the country spending more than it takes in through tax revenue. That, in turn, increases the national debt to finance the deficit. Many economists warn that there are costs, such as higher interest payments to pay off large amounts of debt.
“The bottom line is we’re on this explosive path right now,” Smetters said.
At some point, the rising U.S. debt could cast doubt in capital markets about the federal government’s ability to raise taxes or cut spending enough to avoid the debt, he said.
“None of the candidates is serious about tackling the big issues — the house is on fire and the candidates are fighting over furniture,” Smetters said. “They’re just making things worse and ruining the economy.”
