Kamala Harris has come out in support of several tax hikes in President Biden’s 2025 budget proposal, as well as other tax policies. Overall, they seek to expand the role of government, by both increasing revenue and spending.
While these proposals may not make their way to her desk if she is elected president, they shed light on the orientation she seeks for the country. The Harris-Walz campaign website does not show any policy plans, but some major items have been gathered from statements and press releases the campaign has made.
Federal Corporate Tax Rate Increase
In Harris’ 2020 presidential campaign, she suggested raising the corporate tax rate to 35 percent, though it seems she is now supporting a raise to 28 percent in alignment with President Biden’s 2025 budget proposal. Since 1993, the corporate tax rate remained at 35 percent until the 2017 Tax Cuts and Jobs Act, signed into law by President Donald Trump, cut it to 21 percent. The 2022 Inflation Reduction Act, signed into law by Joe Biden, implemented a 15 percent minimum corporate tax but did not change the rate.
The average corporate tax rate among countries in the G20 other than the US is 25.93 percent, while the proposed increase by the US would move rates above those in Canada, China, and the United Kingdom. This prompts large businesses to have their headquarters in other countries, which could affect employment opportunities and negatively impact tax revenue.
New Unrealized Gains Tax
This proposal has been perhaps the most controversial, a new tax that has never been enacted before in American history. The policy dictates that households worth over $100 million will be taxed annually at least 25 percent of both their income and unrealized gains.
Unrealized gains refer to the growth in value of an asset a household owns if they have not sold the asset. Under current policy, a sale of an asset would be a taxable event, meaning that capital gains tax or income tax would apply at that time. Under the new proposed policy, if a house was purchased for $1,000,000 in one year, and the next year was worth $1,100,000, the unrealized gain (if the property had not sold) would be $100,000. This would be taxed at a rate of 25 percent, meaning the owner(s) would be required to pay $25,000 for that year.
There are many questions such a policy prompts, with many believing that it would be economically devastating. How would values be determined every year, without a sale? While assets like real estate have established norms of commercial and tax appraisals, for many assets this is a dubious matter. If a sale price is lower than a previously determined value, will there be a refund of the difference? What does this mean for business owners and startups? Small businesses, and especially startups, often have dramatic changes in business value as they navigate growing and changing their business; the value of these businesses, without a transaction, is very speculative.
While the policy may be marketed as a “billionaire” tax, it would harm people at all economic levels. Assets will likely be offshored (moved to another country) to avoid the tax, hurting the American economy and jobs. Successful growing companies will be burdened by enormous tax bills, disincentivizing growth and innovation.
Capital Gains and Dividends Taxed at Income Tax Rates
Under current policy, those in many of the higher income tax brackets pay less in taxes on income that is considered to be capital gains. Long term capital gains rates top out at 20 percent, referring to money made by selling an asset that was held for at least one year. This rate is lower than the income tax rate for anyone earning more than $47,151 if single, or $94,301 if married and filing taxes jointly.
The current system creates an odd and criticized situation where investing is incentivized against employment income for above-average or high earners. A doctor making $300,000 a year would pay more in taxes than someone earning $300,000 a year in passive dividend income from stock investing.
While the progressive solution is to raise the capital gains and dividend taxes to match those of regular income taxes, a more capitalist or free-market solution could be to lower income taxes to match capital gains and dividend rates.
Conclusion
Americans are currently suffering from the lingering effects of inflation, amid an economy that many consider to be teetering on the edge of collapse. From January 2020 to June 2024, the cost of repairing a vehicle has gone up 47.5 percent, eggs are 40.1 percent more expensive, and car insurance has gone up 47.3 percent. The Bureau of Labor and Statistics recently revised 12 months of jobs numbers down by 818,000.
Voters are searching for answers. The progressive answer, represented by the Harris campaign, is to tax the economy and redistribute wealth through social programs. With many major issues being debated in the presidential election, tax policy is one that is sure to affect nearly all Americans.
The November election will be a chance for Americans to accept or reject progressive tax policy.
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