US Vice President Kamala Harris and Republican contender Donald Trump have unveiled new tax and spending proposals as they vie for voter support by promising relief from financial burdens. However, budget forecasters are struggling to keep up with the evolving plans, which could significantly impact federal debt.
Trump has proposed extending the 2017 tax cuts, exempting Social Security and tip income from taxes, and further reducing corporate taxes. According to estimates from the Penn-Wharton Budget Model, the Committee for a Responsible Federal Budget (CRFB), the Tax Foundation, and Oxford Economics, these measures could add between $3.6 trillion and $6.6 trillion to US deficits over the next decade.
In contrast, Harris’ proposals include expanding the Child Tax Credit, introducing a $6,000 bonus for newborns, a $25,000 first-time homebuyer credit, and eliminating taxes on tips. These plans could either reduce deficits by up to $400 billion or increase them by as much as $1.4 trillion over ten years, based on the same forecasts.
The estimates vary as new proposals and adjustments are frequently introduced on the campaign trail. For instance, Harris’ new $50,000 tax deduction for business startups and lower capital gains tax rates are not yet fully accounted for in the forecasts. Meanwhile, Trump’s recent comments about reserving the reduced corporate tax rate for US-manufactured goods are also not included.
The key difference between the candidates lies in their approach to the expiration of individual tax cuts set to end in 2025. Trump aims to make all 2017 tax cuts permanent, including those for high-income earners, which could reduce revenues by $3.3 trillion to $4 trillion over ten years. Harris proposes extending these cuts only for those earning under $400,000, aligning with a Biden pledge, but this would still add up to $2.5 trillion to an already projected $2 trillion in spending.
Harris has also endorsed substantial tax hikes from Biden’s 2025 budget, including taxing unrealized gains over $100 billion and raising the corporate tax rate to 28%. This approach, though controversial on Wall Street, is seen as a way to offset the costs of her spending plans.
Trump, on the other hand, has not proposed any conventional tax increases to balance his tax cuts. He suggests that his policies will be funded by enhanced economic growth, new tariffs, ending clean energy subsidies, and a government efficiency commission led by Elon Musk. The Tax Policy Center estimates that Trump’s proposed tariffs could raise up to $3.8 trillion but might also reduce other revenues due to their economic impact.
Overall, Trump’s proposals are expected to lead to a significant increase in federal debt, while Harris’ plans include some revenue-raising measures to mitigate the deficit impact.
