5 things to know about Harris and Trump on taxes

Tax policy is set to take center stage after the election, as major portions of the tax code are due to expire by the end of 2025.

Key portions of former President Trump’s Tax Cuts and Jobs Act — his marquee 2017 tax-cut law — are set to expire in 2026, including reductions to personal income tax rates.

But Trump and Vice President Harris are making bold proposals beyond those expirations, and the tax code could look substantially different in the coming years than how it looks now.

Here’s a look at some of the major proposals on taxes from the two candidates and what they could mean for different taxpayers.

Trump is fighting to protect his tax cut law

The 2017 tax cuts were one of Republicans’ signature pieces of legislation during the Trump administration. Some Republicans want a clean extension of the 2017 law.

Those cuts lowered various individual income tax rates from 39.6 percent to 37 percent, 33 percent to 32 percent, 28 percent to 24 percent, 25 percent to 22 percent, and 15 percent to 12 percent.

The lowest bracket was held steady at 10 percent, and a wealthier bracket was maintained at 35 percent. Wealthier people tend to receive significant portions of their income in ways that are not legally designated as income, such as through capital gains.

Critics have blasted the law as fueling economic inequality, which has skyrocketed in recent decades. President Biden said he wants the law to expire, while representatives for the Harris campaign remained mum on her position. Harris, however, has tacked rightward relative to the president on some tax-related issues, including setting the capital gains tax rate at a lower level than Biden proposed.

Harris, Trump fight over corporate income tax

Trump’s 2017 tax law also included major changes to business taxes and halved the corporate tax rate, bringing it down to 21 percent from 35 percent.

This had the effect of bringing more foreign investment into the U.S. and aligning international capital flows with domestic ones, according to research from Harvard University, Princeton University, the Treasury Department and the University of Chicago.

“Domestic investment of firms with the mean tax change increases 20 percent versus a no-change baseline. Due to novel foreign incentives, foreign capital of U.S. multinationals rises substantially,” economist Gabriel Chodorow-Reich and other researchers wrote in a paper from earlier this year. 

“These incentives also boost domestic investment, indicating complementarity between domestic and foreign capital,” the group added.

Trump has said he wants the corporate rate to be lower, dropping it down to 15 percent.

Harris said that would be a move in the wrong direction; she wants to raise the corporate rate up to 28 percent. She has also proposed tax measures specifically for small businesses, contrasting broader moves with top-line corporate tax rate.

Harris said in August the Trump cuts have gone “overwhelmingly … to the wealthiest Americans and corporations and exploded the national deficit.”

Financially-focused Democrats in the Senate have also cautioned that too many tax benefits geared toward corporations can backfire and result in monopoly and oligopoly structures.

“Will the tax code incentivize billionaires to hoard their money, corporations to grow into titanic monopolies and multinationals to ship jobs overseas?” Sen. Elizabeth Warren (D-Mass.) asked in a September hearing of the Senate Banking Committee about 2025 tax reforms.

Harris floats tax credit for homebuyers

Harris is advancing a tax proposal to help first-time homebuyers, a targeted tax measure geared toward a U.S. property market that has been jostled both by an interest rate-tightening cycle and an underlying shortage of available properties.

The plan would also include $25,000 in down payment support for first-time homeowners. Home renters who paid their rent on time for two years and are buying their first home would be eligible for the down payment assistance tax credit.

The National Association of Home Builders estimated the U.S. housing shortage at 1.5 million vacant units in 2022. The National Association of Realtors puts that number at 5.8 million, while Freddie Mac puts the number at 3.8 million. The estimates pertain to somewhat different time frames and involve different calculations.

Rents rose 4.8 percent annually as of September, above the 2.4-percent of the general consumer price index, since rental inflation tends to lag inflation overall.

Trump pledges to drastically expand tariffs

Trump is planning to dramatically expand the U.S. tariff regime, building off the billions in new levies imposed during his first term.

At first, Trump proposed a 10-percent general tariff with a 60-percent tariff on Chinese goods, but has since expanded that to 20 percent.

While Biden maintained some of Trump’s tariffs and expanded tariffs on certain Chinese high-tech products, experts say Trump’s proposed expansion could reshape the U.S. economy.

“Biden’s tariffs on China [were] more geopolitical than economic,” Howard Gleckman, a senior fellow at the Tax Policy Center, told The Hill. “Clearly that was industrial policy.”

“Trump is industrial policy on steroids,” he added.

Gleckman said it’s nearly impossible to find any mainstream economists who think tariffs are a good idea. “All the evidence is that tariffs raise prices for U.S. consumers, and they don’t create jobs,” he said.

Both candidates have outside-the-box tax pitches

Trump and Harris have both delivered one-off tax pledges on the campaign trail, though Trump’s tally is likely higher than Harris’s.

Trump has made promises about making auto loans tax-deductible, about getting rid of the state and local tax (SALT) deduction cap that was initiated as part of his 2017 tax law, about canceling taxes on tips and overtime, and about the double taxation of Americans living abroad.

Harris has proposed a $50,000 tax credit for people who want to start small businesses and expanding capital gains taxes, among others.

Tax Foundation senior economist Erica York described the Republican proposals as “a random collection of tax cuts” and noted “they’re getting very expensive.”