The next U.S. president, whether Kamala Harris or Donald Trump, will face a crucial early test on a key economic issue: taxes. A significant portion of Trump’s 2017 tax cuts are set to expire at the end of 2025, and both candidates are making taxes a central theme in their campaigns.
The Stakes: Expiring Tax Cuts and Economic Impact
Trillions of dollars hang in the balance as the expiration of these tax cuts looms. The outcome will test the ability of Democrats to play offense on an issue that has traditionally favored Republicans. Trump, who has repeatedly touted the 2017 tax cuts as the largest in history, is proposing to extend all temporary provisions and even add more cuts, including the elimination of taxes on tips and Social Security income. He has also hinted at further reducing the corporate tax rate.
On the other side, Kamala Harris has adopted President Joe Biden’s tax-the-rich platform, which includes proposals to expand the Child Tax Credit and eliminate taxes on tips. Harris has been vocal about her commitment to giving money back to working- and middle-class Americans, contrasting her plan with Trump’s focus on tax cuts for billionaires.
Competing Tax Plans: Harris vs. Trump
Harris has positioned herself as a defender of the working class, arguing that wealthy Americans are not paying their fair share. She has proposed raising taxes on those earning above $400,000 and increasing taxes on capital gains for high earners. Harris has also indicated her support for tightening rules on estate taxes.
Meanwhile, Trump continues to champion his 2017 tax law, claiming it has generated “tremendous growth.” He argues that extending these cuts and introducing new ones will help pay off the national debt through economic expansion. Trump’s campaign has also depicted Harris’ tax plans as part of a Marxist agenda, particularly criticizing her proposals to stop “corporate price-gouging.”
Political Implications and Challenges Ahead
Traditionally, taxes have not been a strong issue for Democrats, with Republicans dominating the narrative since the 1980s. However, recent polling suggests that the Trump tax cuts were never widely popular, and Democrats now see an opportunity to gain ground by targeting high earners and corporations.
Democratic leaders have praised Harris’ decision to focus on taxes as a key issue, but they acknowledge the challenges in implementing her proposals, especially if Democrats do not gain full control of Congress. North Carolina Governor Roy Cooper emphasized the importance of Harris’ message, noting that it resonates with everyday working people. However, he also cautioned that pushing such legislation through Congress would be an uphill battle.
The Role of Congress and Potential Outcomes
The battle over taxes will ultimately depend on the makeup of Congress after the 2024 elections. If Republicans control both the White House and Congress, they are likely to push through their tax plan using budget reconciliation, as they did in 2017. If Democrats hold sway, they would likely pursue a similar strategy for their own tax agenda.
Even within the Republican Party, there is some hesitation about the cost of extending all the expiring tax cuts, which would amount to $4.6 trillion over ten years. Some Republicans have expressed openness to a corporate tax hike, reflecting concerns about the deficit.
If the government remains divided, hard bargaining will be required to avoid a sudden tax increase on millions of Americans at the end of 2025. The breakdown of recent legislation aimed at expanding the Child Tax Credit while reviving expired business tax breaks underscores the difficulty of reaching a bipartisan agreement on taxes.
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