2024 Election: Tax Policies and Their Implications

Taxes will be a pivotal issue in the 2024 election, shaping Americans' financial futures significantly.

### The Tax Debate: Implications for Americans in the 2024 Election
* 💰 " 56% of Americans say they **pay too much in federal income tax**, and only 22% believe they **receive valuable services** from those taxes.
* 📉  A significant **57% of Americans prioritize reducing the budget deficit**, highlighting a growing concern over government spending and taxation.
* 🗳️  The 2024 election cycle is crucial, with many referring to 2025 as "**Tax Armageddon**" due to the expiration of provisions from the **Tax Cuts and Jobs Act (TCJA)**.
* 💸  If the TCJA expires, approximately **62% of taxpayers could see an increase in their tax bills**, as the act provided **substantial tax cuts for the majority**.
* 📊  The average middle-income taxpayer saved about **$900** due to the TCJA, while the top 1% saved around **$61,000**, revealing a **disproportionate benefit distribution**.
* 📈  Vice President Harris and former President Trump present contrasting tax plans, with Harris focusing on **raising rates for the wealthy and corporations**, while Trump aims to **cut tax rates further**.
* 🏠  Harris proposes tax credits for families and homebuyers, but concerns arise that such measures may **not effectively address housing supply issues**.
* 💼  Ultimately, any tax policy changes will require Congressional approval, making the **2024 election pivotal** in determining the **future of American tax policy**.

56% of Americans say they pay too much in federal income tax, and only 22% believe they receive valuable services from those taxes. At the same time, 57% of Americans say reducing the budget deficit should be a top priority for the President and Congress. We need to keep a very robust income tax system in order to pay for the spending that we want. An alternative to balancing the budget is cutting spending, but spending cuts would result in a lower standard of living, by and large, for many Americans. Taxes are a big deal in the 2024 election cycle. Some people have been referring to 2025 as Tax Armageddon or the Super Bowl of Taxes. And that is when a bunch of provisions from the Tax Cuts and Jobs Act that was enacted in 2017 will be sunsetting. If the 2017 tax cuts are allowed to expire after 2025, about 62% of taxpayers would see their tax bills go up, and that's because the TCJA provided

tax cuts for the vast majority of taxpayers. This means the 2024 elections will determine which political party will get to shape Americans' taxes for years to come. Vice President Harris views the tax code as a tool to advance her economic and social goals. Trump's basic tax plan is to cut tax rates domestically and increase tariffs on products that are imported. Here's what former President Trump's and Vice President Harris's tax plans would mean for your wallet. The 2017 Tax Cuts and Jobs Act, or the TCJA, was one of the Trump administration's defining policies. If it is allowed to expire, the vast majority of Americans would see their tax bills go up. The average American saved on taxes as a result of the Tax Cuts and Jobs Act, but the saving was disproportionate. A middle-income taxpayer saved about $900 by 2025, whereas the top 1% saved about $61,000, according to estimates from my shop, the

Tax Policy Center. For example, one of the things we did in that bill was we doubled the standard deduction. So today in America, only 9% of Americans itemize their deductions. That's an amazing thing. That's a record low. That was one of the greatest tax simplification measures. On the campaign trail, Trump has put forth additional policy proposals he would pursue on top of extending the TCJA. He's talked about exempting tip income from taxes entirely, and he's talked about exempting Social Security benefits from taxes. To exempt Social Security from taxation would accelerate Medicare insolvency by six years and Social Security's insolvency by one year. It's a pain point for seniors who are hit by that tax. And Social Security is such a key issue during this election that it's easy to understand why he may have proposed that. If Trump wins the 2024 election and is able to enact his plan into law, the average American's tax return

will likely remain mostly unchanged since he plans to extend the 2017 TCJA. However, these tax cuts may lead to a significant increase in the federal deficit. The Tax Cuts and Jobs Act from the start was going to grow the federal debt. Congress budgeted itself $1.5 trillion of extra tax cuts. The Republicans pursued a strategy of borrow and spend. In effect, they understand that cutting taxes would increase the deficit. I think their theory is that cutting taxes pay for themselves eventually by spurring more economic growth. I don't think we saw that. I think very few people believe tax cuts pay for themselves. But tax cuts are immensely popular. Everything we have to do should be oriented towards one thing: increasing the rate of economic growth of our country. The Congressional Budget Office, or CBO, estimates an extension of the TCJA would cost the federal government more than $4.5 trillion over ten years, including interest payments on the debt.

That's about a $1.1 trillion increase from the CBO's projections in 2023. It did cut taxes. It also stimulated new investment, a little bit more growth, which raises tax revenue elsewhere. But even accounting for those positive benefits, it still cut taxes, increased deficits, and ultimately increased debt. Taxes support our spending. And in the long run, taxes and spending need to balance. In the short run, we can borrow to spend, but eventually, we will need to repay that borrowing. The US borrows a lot for its spending relative to other industrial countries. We tax relatively lightly but spend comparably to other industrial countries. That leaves our deficit growing. When we're borrowing that money, it tends to come from foreign investors. So the returns that we have to pay for borrowing that money go to foreigners rather than those returns going to Americans. So it does decrease income somewhat. It's not entirely clear how Harris would deal with the Tax Cuts and Jobs Act.

The administration's budget this year noted that they would continue those policies for people making under $400,000. That's pretty much 98% of taxpayers. So, in a way, you could say that Trump and Harris agree on the tax cuts for about 98% of the population. I believe Vice President Harris wants to advance a care economy. That is, to provide for the help that Americans need for basic services. And those basic needs and resources include a living stipend, rental assistance, housing assistance. Unfortunately, what Kamala Harris wants is not tax reform. It's tax reform. She wants to raise the tax rates, which is like a hurdle for the US economy. And then she wants to create all these new loopholes that just becomes, you know, a field day for tax accountants and lobbyists. Like Trump, Harris has pledged to do away with federal income tax on tips. But one component of Harris's plan that differs from Trump's is increasing a partially refundable child tax.

credit. The child tax credit was designed to help low- to moderate-income families. It's a benefit for people with kids. Republicans and Democrats differ on some basic design issues for the child tax credit, most notably whether the credit will be refundable or not. A refundable tax credit gives you the ability to get money back as a refund, even when you have no tax liability for the year, so it can be really beneficial to lower earners who wouldn't otherwise owe taxes. So Republicans favor the tax credit, especially for middle-class and higher-income taxpayers, whereas Democrats favor the tax credit all the way up and down the income ladder. In 2017, the Tax Cuts and Jobs Act, the Republican bill, doubled from $1,000 to $2,000 the child tax credit. And then later, as part of President Biden's American Rescue Plan, the child tax credit was increased even more and was made refundable.

But Biden could not bring along any Republican votes. So basically, the Republicans favor more children tax credits, but the Democrats favor them even more. Harris's plan also gives qualifying households with a newborn a $6,000 tax credit. Additionally, she proposed a tax credit worth up to $25,000 for some first-time home buyers. Many of the housing policies are designed to boost demand for housing rather than address the fundamental issue, which is supply constraints. Providing tax credits for home buying, it sounds nice, but a lot of that will just funnel into the price of buying a home and ultimately not be effective in helping increase homeownership and increasing the housing supply. You have to look at the cost of housing and regulations that are holding back building if you really want to address housing affordability. Harris has put forth policies that will bring in revenue to offset the tax credits, mainly by taxing corporations and the wealthy at higher rates.

The campaign has said they would maintain a commitment to fiscal responsibility, and they have highlighted asking the wealthiest Americans and large corporations to pay their fair share. Harris has also endorsed Biden's budget for 2025, which includes a 25% minimum tax on individuals with more than $100 million in wealth, based on a combination of their income and unrealized capital gains. Harris has also put forward a plan that includes a 28% tax on long-term capital gains for any household with an annual income of $1 million or more, which is lower than Biden's proposed 39.6% rate. Vice President Harris in August proposed an increase of the corporate tax rate would boost that up to 28%, up from 21%, which aligns with President Biden's fiscal year 2025 budget. The through line, I think, is imposing higher taxes on businesses and entrepreneurs and the wealthy, and then using that to redistribute income toward other

parts of the economy, whether that's families or homebuyers. So really increasing the role and the scope of the federal government and using the tax code as a tool for doing that. If Harris wins the 2024 election, the average American making under $400,000 would likely see their current tax rates maintained, along with the potential for additional benefits from expanded tax credits. Lower-income Americans might receive more benefits through refundable tax credits. It's unclear whether Harris's revenue raisers would be enough to offset the additional tax credits. In August 2024, Vice President Harris unveiled a number of economic proposals. And that collection of proposals, the Committee for a Responsible Federal Budget estimated that that could increase the deficits by $1.7 trillion over a decade. The Harris campaign did not provide comment to CNBC in time to participate in this report. Roughly 6 in 10 Americans say it bothers them a lot when corporations don't pay their fair share, and

another 60% say the same about wealthy people. There is, however, a significant partisan divide, with 85% of Democrats and only 45% of Republicans supporting higher corporate taxes. From the business side, the Tax Cuts and Jobs Act created a new international tax regime, much more sensible, actually, than the old one. The only problem, in my view, was that the Tax Cuts and Jobs Act set the corporate tax rates too low. The corporate tax rate reduction was kind of one of the jewels of the 2017 tax cuts. And we did this not because we love corporations, but because we love jobs. And we want jobs located here in the United States. If you look at the situation before Trump was president, as Trump put it, it was like we were putting a tariff on our own goods and services. And what country does something like that? So we took that top tax rate down from about 40%, down to about 25%.

when you include the state and local taxes, and that put America back in the game. Another complicating factor with Harris's proposal to increase the corporate tax rate back up to 28%, the TCJA lowered it from 35% to 21%. So it might sound like a 28% is just halfway back to where it used to be. But the TCJA also made significant changes to the corporate tax base. So the base is a lot broader now, meaning that when you raise the rate, you're actually doing more than just taking back half of the rate cut. You're going further than that because you're taxing a greater share of corporate income than was taxed before. In direct comparison to Harris's plan, Trump has proposed lowering corporate tax rates further. The TCJA set them at 21%. Trump told Bloomberg Businessweek he hopes to drop rates as low as 15%. The Tax Foundation estimates that cut would reduce federal revenue by roughly $460 billion.

over ten years. Another policy he has talked about that harkens back to his first administration is imposing more tariffs, potentially a 10% or 20% universal tariff plus a 60% tariff on everything we buy from China. Trump's tariffs would only replace about 8% of the $34 trillion of federal income tax that the CBO expects to collect year after year, so tariffs cannot replace income taxes. He wants to impose what is, in effect, a national sales tax on everyday products and basic necessities that we import from other countries. That will devastate Americans. Tariffs have a similar burden as a sales tax. They apply to goods that we purchase from foreign businesses. They ultimately fall on consumers. But I think economically it has a very similar burden to a sales tax. Having worked with Trump on the tariff issue, he really does believe in reciprocity. He believes in kind of tit for tat. If you're going to hit us, we're going to hit you.

And I've seen him use tariffs very effectively as a negotiating tool to get other countries to do things that are in America's interests. It's ironic that Kamala Harris is attacking Trump on tariffs. President Biden chose to maintain many of Trump's tariffs and has also imposed new ones on targeted Chinese imports. But Trump implemented more wide-ranging tariffs, including on steel and aluminum from various countries. In the end, it won't just be up to the president to decide which policies are implemented. The reality is that any type of tax changes would need to be approved by Congress, and so it will depend on which party controls both chambers, as well as who controls the White House, as to what we might see or not see happen after 2025.

How Your Taxes May Change After 2025

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The Impact of Federal Income Tax on Americans

56% of Americans feel they pay too much in federal income tax, with only 22% believing they receive valuable services in return.

The 2024 election is crucial for shaping future tax policies, as the expiration of the 2017 tax cuts in 2025 could lead to tax increases for 62% of taxpayers.

Trump's tax plan focuses on cutting domestic tax rates and exempting certain incomes from taxes, while Vice President Harris aims to use the tax code to advance her economic and social goals.

The Impact of the TCJA and Future Tax Policies

The 2017 Tax Cuts and Jobs Act (TCJA) is set to be extended, potentially increasing the federal deficit by over $4.

The strategy of borrowing to fund tax cuts has been criticized for not effectively spurring economic growth.

Vice President Harris's approach to tax reform aligns with Trump's for 98% of taxpayers but aims to raise tax rates and create new loopholes, while also increasing the partially refundable child tax.

The child tax credit aims to assist low- to moderate-income families, with Republicans and Democrats differing on its design and refundability.

The credit was doubled in 2017 and further increased and made refundable by President Biden's American Rescue Plan.

Vice President Harris has proposed additional tax credits for newborns and first-time homebuyers, while also advocating for higher taxes on corporations and the wealthy to offset the cost of these credits.

Vice President Harris's Economic Proposals and Their Impact

Harris's potential 2024 election win could maintain current tax rates for Americans making under $400,000 and provide additional benefits through expanded tax credits.

Her economic proposals are estimated to increase deficits by $1.

7 trillion over a decade, with a significant partisan divide on support for higher corporate taxes.

The Tax Cuts and Jobs Act previously lowered corporate tax rates, and Harris's proposal to raise them back to 28% would have a broader impact on taxing corporate income.

Trump is considering imposing universal tariffs of 10% or 20% and a 60% tariff on imports from China, aiming to replace a small portion of federal income tax.

These tariffs, similar to a national sales tax, would burden consumers and potentially devastate Americans.

The effectiveness of Trump's tariff strategy as a negotiating tool is noted, but any tax changes would ultimately require approval from Congress, making the future implementation uncertain.