Who says Democrats and Republicans can’t agree? A few weeks back, Donald Trump advocated for eliminating taxes on tips of workers in the hospitality and service sector. Now his opponent Kamala Harris is also pledging to cut taxes on tip income if elected.
Trump’s tax proposals go further than giving workers hospitality and service sector workers a break from the IRS. Harris on the other hand is looking to raise taxes in other key areas — and could even borrow a page from a former Republican commander-in-chief who who left office 50 years ago this month.
Here’s a rundown on how businesses and wealthy taxpayers will fare under a Trump or Harris administration come January:
Harris & Trump Differ On Tax Rates
Trump and the then-GOP Congress lowered the corporate tax rate from 35% to 21% through the 2017 Tax Cuts & Jobs Act. The 21% rate is set to expire on December 31, 2025. Outgoing president Joe Biden pledged to raise the rate to 28% if reelected, and Harris wants to do the same.
A 28% rate is “a fiscally responsible way to put money back in the pockets of working people and ensure billionaires and big corporations pay their fair share,” the Harris campaign says. The Congressional Budget Office (CBO) says going to 28% would raise hundreds of billions. A one percent increase in the corporate tax rate would bring in an extra $100 billion into the Treasury over a 10-year period, according to the CBO.
Harris is also supporting two tax increases first floated by Biden: a 44.6% capital gains tax and a 25% tax on unrealized gains. Trump instead wants to cut taxes to spur the economy and job growth. Trump recently called for lowering the corporate tax rate from 21% to 20%. Republicans in Congress are pushing instead for a 15% rate, which Trump is likely to support.
Analyses of the 2017 tax cuts vary along political lines. GOP-friendly groups say the lower tax rate spurred job growth and domestic investment. Democrat-leaning critics counter the legislation primarily benefited the top 10% of earners and didn’t trickle down to the middle and working classes.
Harris to Borrow a Page from Nixon?
Harris startled members of her own party in calling for price controls on food makers and grocery store chains. The Harris campaign didn’t go into much detail on how a “first-ever federal ban on price gouging on food and groceries” would work, except to say the Federal Trade Commission (FTC) and state attorney generals would be granted “authority … to investigate and impose strict new penalties on companies that break the rules.”
No doubt Harris (and all Democrats) are getting a lot of grief from their voters on inflation. Grocery prices are up anywhere from 35% to 50% over the past two years due to trillions of dollars in bipartisan COVID-19 spending and the Democrats’ 2021 Inflation Reduction Act. Harris aims to pass rules on corporations so they “can’t unfairly exploit consumers to run up excessive profits on food and groceries.”
Former president Richard Nixon set a 90-day freeze on wage and price controls in 1971 to keep inflation down after taking the U.S. off of the gold standard. Inflation shot up anyway but not nearly enough to hurt Nixon at the ballot box — he won 49 of 50 states in his 1972 re-election bid.
Don’t be surprised if Harris squares her sights on the pharmaceutical industry too. During her presidential run in 2019, Harris threatened to “snatch” patents away from drug companies that charged exorbitant prices. She made the case for setting prices on prescription drugs and treatments similar to her food industry plan. Note: Trump and Harris agree that price caps on insulin are a good idea.
What About the Debt?!
Trump is making the case for ending taxation of Social Security (SS) benefits paid to senior citizens. SS benefits weren’t taxed until 1984 and today about 40% of SS recipients pay income tax on retirement, spousal and disability benefits.
Trump’s pledge could help him peel off some Baby Boomer votes from Harris. But how will such a plan be paid for? Minus substantial cuts by Congress and the President, cutting SS income taxes will just add more fuel to the $35 trillion deficit inferno.
From 2017 through 2018, Trump and the Republicans who controlled both chambers of Congress could’ve taken a hatchet to spending and shut down at least one of the federal agencies they rail against. George W. Bush and Congress could’ve done the same from 2003 to 2006. But they didn’t.
This election cycle Trump is barely talking about the national debt. Neither is Harris who also seems to think the government can continue spending for eternity as did Joe Biden before her. CFOs and controllers know the score on that matter and are doing what they can to brace their companies for the inevitable impact.
