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KAMALA HARRIS’ $5 TRILLION TAX PLAN  
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Andrew Duehren
August 22, 2024
New York Times
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_ Kamala Harris' campaign has rolled out its most ambitious economic
policy proposal to date: a highly progressive set of tax reforms that
would raise nearly $5 trillion over a decade. Here's who would pay and
what it might buy. _

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In a campaign otherwise light on policy specifics, Vice President
Kamala Harris this week quietly rolled out her most detailed,
far-ranging proposal yet: nearly $5 trillion in tax increases over a
decade.

That’s how much more revenue the federal government would raise if
it adopted a number of tax increases that President Biden proposed in
the spring
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Ms. Harris’s campaign said this week that she supported those tax
hikes, which were thoroughly laid out in the most recent federal
budget plan prepared by the Biden administration.

No one making less than $400,000 a year would see their taxes go up
under the plan. Instead, Ms. Harris is seeking to significantly raise
taxes on the wealthiest Americans and large corporations. Congress has
previously rejected many of these tax ideas, even when Democrats
controlled both chambers.

While tax policy is right now a subplot in a turbulent presidential
campaign, it will be a primary policy issue in Washington next year.
The next president will have to work with Congress to address the tax
cuts Donald J. Trump signed into law in 2017. Many of those tax cuts
expire after 2025, meaning millions of Americans will see their taxes
go up if lawmakers don’t reach a deal next year.

Here’s an overview of what we now know — and still don’t know
— about the Democratic nominee’s views on taxes.

Higher taxes on corporations

The most recent White House budget includes several proposals that
would raise taxes on large corporations
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Chief among them is raising the corporate tax rate to 28 percent from
21 percent, a step that the Treasury Department estimated could bring
in $1.3 trillion in revenue over the next 10 years.

Because the vice president supports the Biden budget’s tax hikes,
Ms. Harris has also endorsed raising a tax on stock buybacks to 4
percent from 1 percent. Democrats first approved the stock buyback tax
in 2022 as part of the Inflation Reduction Act. The legislation also
requires big companies to pay taxes worth at least 15 percent of the
income they report to investors. The goal of the new minimum tax is to
curb companies’ ability to use deductions and tax credits to shrink
their tax liability to as low as zero. Mr. Biden’s budget — and
now Ms. Harris’s presidential campaign — calls for increasing
that
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tax to 21 percent from 15 percent.

In his budget, Mr. Biden also put out an overhaul of how multinational
companies’ foreign earnings are taxed in the United States. The goal
is to bring the United States into compliance with an international
agreement that aims to stop companies moving into low-tax
jurisdictions to avoid paying taxes. Mr. Biden’s budget calls for
increasing and reorganizing a global minimum tax. Under the plan, the
tax would be assessed on income in each individual country where the
company operates, rather than on its global profits overall. The rate
would double to 21 percent from 10.5 percent.

The budget Ms. Harris has now adopted also disallows companies from
deducting the compensation of all employees making more than $1
million.

High-earning Americans would pay more

The White House tax plan would raise taxes on high-income Americans
through two avenues: First, by increasing the rate they pay on
existing income taxes, and second, by more broadly reshaping the
taxation of investment gains for the wealthiest taxpayers.

Ms. Harris would set the top marginal income rate at 39.6 percent, up
from 37 percent. On top of that, she would also increase the rate on
two parallel Medicare surtaxes to 5 percent from 3.8 percent for
Americans making more than $400,000 and expand the income subject to
one of them. Together, the Medicare and income proposals would create
a top marginal rate as high as 44.6 percent.

Wealthy Americans would see more fundamental changes in how gains on
investments in stocks, bonds, real estate and other assets are taxed.
For Americans making more than $1 million a year, investment earnings
would be taxed at the same rate as regular income, instead of at the
lower rates for capital gains.

The White House tax plan targets what some Democrats see as a gaping
loophole in the tax code: the so-called step-up in basis. Under the
current law, Americans owe capital-gains taxes when an asset is sold,
but not if they pass those assets on to someone else at the time of
their death. That means someone who inherits assets from a deceased
parent, for example, does not have to pay taxes on how much those
assets appreciated since they were purchased. Instead, the person who
inherits the assets has to pay taxes on the gains only from the time
they were inherited — and only once they are sold.

Ms. Harris has endorsed a plan to tax the gains on those assets at the
original owner’s death, though several exemptions would apply,
including when a surviving spouse inherits the assets.

The tax plan would also try to tax the wealthiest Americans’
investment gains before they sell the assets or die. People with more
than $100 million in wealth would have to pay at least 25 percent on a
combination of their income and their unrealized capital gains — the
value of the appreciation in the stocks, bonds, real estate and other
assets that they own but haven’t sold. The so-called
billionaires-minimum tax could create hefty tax bills for people like
Elon Musk who derive much of their wealth from stock they own.

Questions still loom

Ms. Harris’s commitment to the White House budget clarifies much
about how she hopes to raise revenue if she wins the election in
November. But even the thick White House budget leaves several key tax
questions unaddressed, including how exactly Democrats should approach
the expiration of key provisions in the Tax Cuts and Jobs Act next
year.

The expiring measures included a broader standard deduction, lower
marginal income rates for many Americans, and a generous deduction for
owners of many closely-held businesses. The White House tax plan
states that Americans making less than $400,000 should not see tax
increases in a deal. That means that Ms. Harris wants to extend much
of the Tax Cuts and Jobs Act, her Republican rival’s signature
legislative accomplishment.

Extending the tax cuts for Americans making less than $400,000 could
take up much of the roughly $4 trillion cost for continuing all of the
lapsing provisions.

Ms. Harris’s campaign has said she would seek to reduce the deficit.
But other proposed tax cuts are piling up. On the campaign trail, Ms.
Harris has rolled out spending plans and several tax cuts, including a
more generous child tax credit, that the Committee for a Responsible
Federal Budget estimates could cost roughly $2 trillion over a decade.

This week, Senator Chuck Schumer, a New York Democrat and the majority
leader, called for the restoration of a huge tax break: the state and
local tax deduction. That deduction is currently capped at $10,000,
but the limit expires after next year. Fully restoring the ability of
Americans to deduct their state and local taxes from their federal
bills could cost roughly $1 trillion over a decade.

So the $5 trillion in tax increases embraced by Ms. Harris this week
may not ultimately be enough to cover the cost of her and other
Democrats’ ambitions next year.

_Andrew Duehren [[link removed]] covers
tax policy for The Times from Washington. More about Andrew Duehren
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* Kamala Harris
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* tax reform
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* progressive taxation
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