Harris vs. Trump: taxes, capital gains and how the candidates compare on the economy

Voters routinely tell pollsters the economy is their most important issue in the 2024 election. And though there are many dividing lines between the two candidates vying for the U.S. presidency, they notably have vastly different economic visions.

Regardless of who wins the White House and which parties control the House and Senate, tax policy will be a major discussion point in Washington next year as many of the provisions in the Republican’s 2017 Tax Cut and Jobs Act expire in 2025.

Whether those provisions should be extended, amended or be allowed to lapse, and how — if at all — a package should be paid for will be hotly debated.

On the campaign trail, both Vice President Kamala Harris and former President Donald Trump have outlined proposals for future tax policy with varying degrees of specificity. Here’s a look at where the candidates stand:

Trump has called for extending the 2017 bill’s provisions that are set to expire, which mostly affect individuals, such as increases in both the standard deduction and the size of the child tax credit.

In May, the Congressional Budget Office estimated that it would cost $4.6 trillion over 10 years to extend the expiring 2017 tax cuts.

Harris, like President Joe Biden, has vowed not to raise taxes on Americans who make under $400,000 annually (about 98% of taxpayers according to the nonpartisan Tax Foundation).

The Committee for a Responsible Federal Budget has estimated the cost of permanently extending the 2017 bill's tax breaks for people earning less than $400,000 could range from about $1.5 trillion to $2.5 trillion over 10 years.

Harris’ economic agenda calls for increasing the stock buyback tax to 4% from 1% and establishing a new billionaire minimum tax (no specifics from Harris are available, but President Joe Biden has proposed a 25% rate for households with more than $100 million of wealth, the Committee for a Responsible Federal Budget noted).

The Democratic nominee also pledges to increase the ordinary capital gains tax rate to 28% from 20% for households making over $1 million per year.

“Billionaires and big corporations must pay their fair share in taxes,” Harris said in a campaign speech earlier this month. “And while we ensure that the wealthy and big corporations pay their fair share, we will tax capital gains at a rate that rewards investment in America’s innovators, founders and small businesses.”

Biden has proposed raising the top marginal tax rate on long-term capital gains to 44.6%, which includes a 5% net investment tax.

“I think Harris politically wanted to position herself more as a moderate, so she aimed lower,” said Steven Rosenthal, a senior fellow in the Urban-Brookings Tax Policy Center at the Urban Institute.

Trump has not called for raising taxes on capital gains.

“On taxing capital, Trump and Harris are going in opposite directions,” Rosenthal added.

And though neither candidate has mentioned carried interest on the campaign trail, private equity, hedge fund and venture capital trade groups are gearing up for a fight next year.

In the 2017 bill Trump signed into law, the corporate tax rate was cut to 21% from 35%. Trump, who touts lower corporate taxes as a boon for businesses and the economy writ large, has called for lowering the rate to 15%.

“To further support the revival of American manufacturing, my plan calls for expanded (research and development) tax credits, 100% bonus depreciation, expensing for new manufacturing investments, and a reduction in the corporate tax rate from 21% to 15%, solely for companies that make their product in America,” Trump said Sept. 6 during a speech before the Economic Club of New York.

Benjamin R. Page, a senior fellow at the Urban-Brookings Tax Policy Center, doesn’t think a further reduction of the corporate tax rate is likely.

“I’m not sure there’s that much appetite for reducing taxes on corporations,” Page said. “If Trump was president and Republicans controlled both the House and Senate, it’s conceivable that that rate could be reduced further but (Trump) might have trouble getting that through Congress.”

On the whole, sources said Republicans in Congress are pleased with where the rate already is.

Harris on the other hand has called for raising the corporate tax rate to 28%.

The Republican candidate has called for imposing a universal baseline tariff on all U.S. imports of 10% to 20% and a 60% tariff on all U.S. imports from China, according to the nonprofit Tax Foundation.

The key to boost American manufacturing “will be a pro-American trade policy that uses tariffs to encourage production here and bring trillions and trillions of dollars back home,” Trump said earlier this month.

Harris in the Sept. 10 presidential debate criticized the plan and referred to it as a tax on Americans.

Trump in the debate disagreed. Consumers are “not going to have higher prices,” he said. “Who’s going to have higher prices is China and all the countries that have been ripping us off for years.”

Economists are less bullish on Trump’s tariff proposal.

According to the Peterson Institute for International Economics, the Trump proposal “would reduce after-tax incomes by about 3.5% for those in the bottom half of the income distribution,” and “would cost a typical household in the middle of the income distribution at least $1,700 in increased taxes each year.” Higher tariffs would pass higher costs onto American consumers, economists say.

Trump has also called for establishing a tariff-backed federal sovereign wealth fund to pay for infrastructure projects and reduce the national debt.

Harris has said she’d like to expand the child tax credit, increase the deduction for startup business costs and provide down payment support for certain first-time homebuyers.

Trump (followed by Harris later) said he’d like to exempt tips from income taxes, cease taxes on overtime work and eliminate the green energy subsidies in the Inflation Reduction Act, which Democrats passed in 2022.

He has also said Social Security benefits should be exempt from taxes.

“People on Social Security have been wiped out by inflation and now on top of it, we tax their benefits,” he said earlier this month.

The Tax Foundation estimates that the major tax changes proposed by Trump would increase long-run gross domestic product by about 1.5% while decreasing the federal tax revenue over the 10-year budget window by $6.1 trillion on a conventional basis.

For Harris, the Tax Foundation estimates the her policies would raise about $1.7 trillion over 10 years on a conventional basis and reduce long-run GDP by 2%.

“We find the tax policies would raise top tax rates on corporate and individual income to among the highest in the developed world, slowing economic growth and reducing competitiveness,” the Tax Foundation said of the vice president’s policies.

Kent Smetters, a business economics and public policy professor at the University of Pennsylvania’s Wharton School, said that both candidates would increase the national debt (currently at $35 trillion) while reducing the size of the economy.

“The analogy I’ve been using is the house is burning down and both the candidates are arguing over the furniture,” Smetters said. “We are on a path right where the economy is in a dangerous position of adding more and more debt.”

Smetters added that lawmakers need to establish a plan to tackle the mounting debt crisis.

“Both candidates are working in the direction of more debt that would contract the economy and promising goodies for everybody but not really taking hard positions that are needed,” he said.