How Much Will the Major Presidential Candidates Steal From You?
Neither Harris nor Trump has a plan to address national debt, but they dramatically differ on taxation.
We know that taxation is theft, and we also know that whichever political candidate wins the upcoming presidential popularity contest will steal from us. The question is, how much will a President Kamala Harris or a President Donald Trump take—information we need to help us appropriately choose our fate? Fortunately, the candidates have told us something of what they have in mind, sometimes grudgingly, so we can compare their effects on the economy and our personal finances.
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Digging Through Verbiage for Details
The Tax Foundation has done the hard work of digging through the servings of word salad issued by the Democratic and Republican parties' chosen standard-bearers this year so that you don't have to. Neither Trump nor Harris is known for being easy to pin down on details, but the Tax Foundation notes the vice president "has sketched out sufficient details of her fiscal and economic agenda for us to provide a preliminary analysis" while her opponent "has floated several tax policy ideas." That's enough to work from for tax purposes, especially given that both have track records—Harris in the Biden administration and Trump when he occupied the White House.
In terms of specifics, the Tax Foundation considers Harris tax proposals, including: increasing the corporate income tax rate from 21 percent to 28 percent; increasing the corporate alternative minimum tax from 15 percent to 21 percent; increasing the top individual income tax rate to 39.6 percent on income above $400,000 for single filers and $450,000 for joint filers; taxing long-term capital gains and qualified dividends at 28 percent; limiting retirement account contributions for high-income taxpayers; and exempting tipped income from income taxation.
Trump proposals analyzed by the Foundation include: making permanent elements of the Tax Cuts and Jobs Act (TCJA) regarding individuals, estates, and business tax phaseouts; lowering the corporate tax rate to 15 or 20 percent; eliminating the green energy subsidies in the Inflation Reduction Act; and exempting both Social Security benefits and tips from income taxes. The Foundation also considers Trump's plan to increase some tariffs on Chinese goods to 60 percent; impose a universal tariff of 10 to 20 percent on all imports; and more.
Who Has the Better Tax Ideas?
Whether there's a clear winner here depends on your perspective. If you're a government employee or a fan of the federal behemoth, you'll be cheered to know that "after taking various credits and tax cuts into account, Harris would raise about $1.7 trillion over 10 years on a conventional basis" for federal coffers. Well, sort of: The Tax Foundation also expects her plans to reduce economic growth; once that's taken into account, the 10-year revenue increase would look more like $642 billion.
That adjustment to expectations of increased revenue comes because the tax analysts expect Harris's polices to "reduce long-run GDP by 2.0 percent, the capital stock by 3.0 percent, wages by 1.2 percent, and employment by about 786,000 full-time equivalent jobs." As a result, they see American incomes declining by 1.8 percent in the long run. There's a big "but" to this analysis though, since Harris's plans venture into relatively uncharted territory.
"Our economic estimates likely understate the effects of the Harris tax plan since they exclude two novel and highly uncertain yet large tax increases on high earners and multinational corporations, namely a new minimum tax on unrealized capital gains and a [undertaxed profits rule] consistent with the OECD/G20 global minimum tax model rules."
By contrast, Trump's plans are predicted to decrease federal tax revenue over the 10-year budget window by (roughly) between $1.2 trillion and $1.3 trillion once the effects of all policy interactions are considered. They also could give the economy a positive jolt.
"We estimate the major tax changes proposed by Trump would increase long-run GDP by about 1.5 percent. Permanence for the individual, estate, and business tax components of the TCJA are the largest drivers," adds the Tax Foundation. Again, though, there's a big "but." We have to consider the likelihood that other governments would retaliate against the U.S. for high tariffs and impose similar barriers on U.S. goods.
"Altogether, we estimate the combination of proposed tax and tariff changes, including foreign retaliation, would reduce long-run GDP by nearly 0.2 percent and hours worked by 387,000 full-time equivalent jobs. Both the capital stock and wages would still rise—by 0.3 percent and 0.6 percent, respectively."
Basically, Trump's domestic tax proposals could offer a significant boost to the economy. But this boost is largely offset by his insistence on raising trade barriers that would almost certainly bring a response in-kind from other countries. "Depending on which combination of proposals Trump ultimately pursues, the overall impact on GDP could range from slightly positive to slightly negative for the US economy."
What About Deficits and Debt?
Not taken into account by either major candidate's tax and revenue plans is the federal government's ongoing addiction to spending more than it takes in. For decades, expenditures have exceeded revenues as a percentage of GDP, and that looks unlikely to change for the foreseeable future. The Congressional Budget Office (CBO) expects federal spending to increase to 24.9 percent of GDP by 2034 while revenues top out at 18.0 percent of GDP. That's a recipe for rising debt.
The Tax Foundation points out that, by 2065, the national debt is expected to rise from about 122 percent of GDP now to 201 percent. Under Harris's proposals, that number is expected to barely shift, arriving at 200 percent. Trump's plans could take debt to 211 percent of GDP. It's a problem either way.
"We estimate that the U.S. debt held by the public cannot exceed about 200 percent of GDP even under today's generally favorable market conditions," economists with the Penn-Wharton Budget Model warned last year. "Under current policy, the United States has about 20 years for corrective action after which no amount of future tax increases or spending cuts could avoid the government defaulting on its debt." The consequences "would reverberate across the U.S. and world economies."
Both Harris and Trump have us hitting that magic number, with all that entails. For the short term, though, Trump's tax and revenue plans look preferable—especially if he can resist his urge to erect tariff barriers that would spark a trade war.
