How Harris' and Trump's tax and spending plans affect the US debt via Reuters
Written by David Lawder
WASHINGTON (Reuters) – Vice President Kamala Harris and Republican Donald Trump have hammered out new tax breaks and spending plans, as they try to win votes by persuading Americans that they will do more to ease their financial burdens.
Budget forecasters are struggling to keep up with the latest changes, and new ideas may be revealed in Tuesday's Harris-Trump debate, but so far all estimates show that Trump's agenda is piling up a lot of new federal debt.
Trump has said he plans to extend all of the tax cuts he passed in Congress in 2017, exempt Social Security and tax revenue from taxes, and also cut the corporate income tax.
These changes could add $3.6 trillion to $6.6 trillion to the US primary budget over 10 years, according to published individual and aggregate estimates from four budget forecasters reviewed by Reuters: the Penn-Wharton Budget Model, the Committee on a Responsible Federal Budget (CRFB), The Foundation of Taxation and Oxford Economics.
Harris' plans, which include expanding the Child Tax Credit, a $6,000 bonus tax credit for newborns, a $25,000 first-time buyer tax credit, and no tax on tips, would reduce the deficit by as much as $400 billion or add $1.4 trillion. to the deficit in ten years, the same predictors were calculated.
The estimates are based on a fixed budget assumption, and are compared to the current Congressional Budget Office “baseline,” which already assumes a massive, $22 trillion debt by 2034.
ROLLING ANALYSIS
Predictions vary greatly depending on which assumptions are made in the campaign trail.
Harris' recently released estimates of a tax deduction of up to $50,000 for business start-up expenses, and a lower capital gains tax than proposed by President Joe Biden are largely excluded.
The predictions include Trump's proposal to lower the corporate income tax to 15% from 21% but not his recent comments that this rate would be reserved only for companies that manufacture their goods in the US.
“Campaign talking points are moving faster than budget models,” said Shai Akabas, director of economic policy for the Bipartisan Policy Center. “I think we're seeing more of what we've expected in recent years, which is that candidates will put their preferred policy ahead of fiscal responsibility on both sides.”
Congress must pass tax and spending legislation, making it difficult for the winner of the Nov. 5 election to accomplish important things without sweeping both the Senate and the House of Representatives.
2025 TAX CLIFF
The biggest difference between Trump and Harris is how they deal with the 2025 expiration of each of the tax cuts that Republicans passed during Trump's 2017 presidency. Without action by Congress, these rates will return to their previous, higher levels.
Trump has promised to permanently extend all expiring tax cuts, including for the wealthiest Americans, which tax and budget experts estimate will reduce incomes over a decade by about $3.3 to $4 trillion.
Harris will extend the 2017 tax cuts for those earning less than $400,000 only, keeping the Biden pledge, but this will add up to $2.5 trillion to a spending program that is already estimated at $2 trillion over ten years.
Harris quietly approved nearly $5 trillion in tax increases in Biden's fiscal 2025 budget request, which includes taxing unearned gains from more than $100 billion and raising the corporate tax rate to 28%.
This has caused confusion on Wall Street but will significantly reduce the cost of his spending plans.
“I think the conclusion that Trump's way of handling taxes is largely motivated by debt is correct,” said Steve Rosenthal, a senior fellow at the Urban-Brookings Tax Policy Center. “I say that because Harris at least has some well-developed fundraisers.”
Trump did not offer any general tax increases to complement his extended tax cuts. Other breaks, including not paying Social Security income, could reduce revenue by $1.6 trillion, the CRFB and the Tax Foundation estimate.
The conservative-leaning Tax Foundation called the move “senseless and fiscally irresponsible,” weakening Social Security and Medicare.
Trump said his tax cuts would be paid for by “billions of dollars” generated by strong economic growth, new import tariffs, ending Biden's clean energy subsidies and a new government efficiency commission led by billionaire businessman and Tesla (NASDAQ: ) CEO Elon Musk. .
The Tax Policy Center estimated that Trump's proposed 10% global tariff and 60% tariff on Chinese imports could raise as much as $3.8 trillion over a decade but would reduce other revenue due to its economic effects, including a de facto tax on households .
The Tax Foundation is the only updated model that includes tax cuts as an offset — $2.6 trillion — but even so, it estimates that Trump's plans will increase the deficit by about $4 trillion over ten years.
