Tax Cuts or Tax Hikes? Harris and Trump Clash on Economic Strategies for the US

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Donald Trump and Kamala Harris are presenting starkly different visions for how to boost the US economy as they gear up for their upcoming debate. Trump is banking on a strategy of significant tax cuts, believing they will drive economic growth so robustly that the resulting budget deficits won’t matter. Meanwhile, Harris is advocating for increased taxes on the wealthy and large corporations to fund policies that directly support middle-class Americans, such as building affordable homes and providing tax breaks for parents. 

 

Trump’s approach is rooted in the belief that lowering taxes for businesses and the wealthy will stimulate investment and economic expansion, with some of his former advisers predicting growth rates exceeding 3%. Despite this optimistic outlook, the US economy never achieved a 3% annual growth rate during Trump’s previous term. However, median household income did see a notable increase between 2018 and 2019, rising by $5,220 to an inflation-adjusted $78,250. Joseph LaVorgna, an economist from the Trump White House, emphasized, “The Trump policies were designed to lift middle-class wages, re-onshore, and re-industrialize. The intention is to get wages higher.”

 

Conversely, Harris is focused on directly addressing the financial challenges faced by the middle class, particularly the high costs of home ownership and raising children. Her plan includes $25,000 in down payment assistance for first-time homebuyers and broader efforts to build 3 million homes in four years. New parents would benefit from a $6,000 tax credit and an expanded child tax credit. Harris’s adviser, Brian Nelson, emphasized that these measures are aimed at empowering Americans to earn more, build businesses, buy homes, and climb the economic ladder.

 

Both candidates also have proposals concerning taxation on tips and Social Security. Trump has proposed eliminating taxes on tips and Social Security income, a move that could cost $1.2 trillion over a decade. Harris has backed the idea of not taxing tips, but experts like Ernie Tedeschi from the Yale Budget Lab argue that the impact would be minimal since a small percentage of workers receive tips, and many do not earn enough to pay federal income taxes. Concerns have also been raised that eliminating taxes on Social Security could jeopardize the program’s ability to pay full benefits starting in 2033.

 

Tariffs are another area where Trump’s plans could have a significant impact. He has floated broad tariffs on imports, ranging from 10% to as high as 20%, and even higher rates specifically on Chinese goods. While Trump argues that these tariffs would encourage domestic manufacturing without driving up inflation, Harris’s campaign warns that such measures could cost a typical household an additional $4,000 annually.

 

The financial feasibility of Trump’s tax plans is uncertain, as he seeks to extend the 2017 tax cuts and further reduce the corporate tax rate from 21% to 15%. This agenda, combined with proposed cuts on tips and Social Security, could add up to a cost of nearly $6 trillion, further straining an already projected $22 trillion deficit over the next decade. The Committee for a Responsible Federal Budget has suggested that Trump’s tax cuts would have minimal long-term impact on growth due to the additional debt.

 

Harris, on the other hand, promises that her spending plans would be funded primarily through increased corporate taxes and other revenue-generating measures, aligning closely with President Biden’s 2025 budget proposal. According to the Penn Wharton Budget Model, Harris’s proposals would add $2.3 trillion in spending, with significant revenue coming from raising the corporate tax rate to 28%. However, her plan would also lead to higher deficits, though the impact on economic growth is expected to be more substantial compared to Trump’s policies.

 

The fundamental difference in the candidates’ plans lies in their impact on tax burdens. Under Trump’s approach, the wealthiest 0.1% of earners would see significant increases in after-tax income, while the poorest 20% would benefit only marginally. In contrast, Harris’s policies would decrease the after-tax income of the wealthiest while significantly boosting the incomes of the poorest Americans. As the nation faces crucial decisions on its economic future, these contrasting approaches highlight the broader debate over how to best support the middle class and ensure sustainable growth.

 

Credit: ABC News 2024-09-05

 

 

 

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[Tug]

Tax the wealthy not the working people we have been coddling those fat cats long enough!

[spidermike007]

No doubt the dumb, and punitive tariffs Trump is proposing on imports will be the equivalent of huge tax hikes on the American consumer. They are poorly thought out and ill advised. More terrible policy. 

[stevenl]

Conclusion from the experts in the article: trumps plans increase the deficit without long term growth, Harris 's plans would also increase the deficit but less with a considerable higher growth.

Trump's plans would help the wealthy, harris's the poor.

[impulse]

I'm all for raising the top marginal tax rate for individuals making (for example) over $1 million a year.  I'm also in favor of treating capital gains the same as the peons' income. 

 

But raising corporate income taxes without implementing international agreements regarding minimum tax rates would just push more corporations to move their "income" to lower tax countries and play games with transfer pricing, licensing agreements and consulting agreements.  All they have to do is move their income to Ireland, by transfer price games, "licensing" their patents they sold to their Irish subsidiary, and pay their 2 Irish employees the rest of their profits for consulting fees.  We had a subsidiary in Ireland that served no purpose other than shifting profits to them and pay (I think) 3% tax on those profits instead of the US tax rate.  And Ireland is just one example.

 

 

 

 

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1 hour ago, impulse said:

I'm all for raising the top marginal tax rate for individuals making (for example) over $1 million a year.  I'm also in favor of treating capital gains the same as the peons' income. 

 

But raising corporate income taxes without implementing international agreements regarding minimum tax rates would just push more corporations to move their "income" to lower tax countries and play games with transfer pricing, licensing agreements and consulting agreements.  All they have to do is move their income to Ireland, by transfer price games, "licensing" their patents they sold to their Irish subsidiary, and pay their 2 Irish employees the rest of their profits for consulting fees.  We had a subsidiary in Ireland that served no purpose other than shifting profits to them and pay (I think) 3% tax on those profits instead of the US tax rate.  And Ireland is just one example.

 

 

 

 

You make an excellent point. Is the US obligated by treaty to recognize this corporate dodge?

I know that in the EU Ireland has landed in hot water for this practice and has had to institute reforms. How much success they'll enjoy is another matter entirely.

Ireland's tax reforms and the fight against aggressive tax schemes

https://www.europarl.europa.eu/RegData/etudes/ATAG/2022/733532/EPRS_ATA(2022)733532_EN.pdf