Tax Talks: A Closer Look at Harris vs. Trump Economic Policies in 2024

The 2024 election has been one of the closest elections the United States has faced since the record voter turnout in 2020. As each candidate's campaign comes to a close, let’s review their economic policies and the potential implications on the economy.

For the first post in this series, we will be discussing tax policies.

Kamala Harris’s Economic Policies:

Tax Credit for a Child’s First Year

In the 2024 election, Harris proposed increasing the current child tax credit of $2,000 to $6,000 during each child’s first year. This builds on the Biden administration's efforts during the pandemic when child tax credits were temporarily increased.

Example: If you owe $2,500 in federal taxes but qualify for a $2,000 child tax credit, you would only owe $500 in taxes (the credit covers the rest). Similarly, if you owe $5,500 but qualify for the $6,000 credit, the government will pay you back $500.

Pros: This policy alleviates financial stress for parents during the early days of parenthood, reduces child poverty rates, and stimulates economic activity, especially for families likely to spend on necessary goods and services.

Cons: While this provides relief for parents, critics argue that the macroeconomic effects may be negative. Increased government spending could further contribute to the U.S. national debt, currently at $33.1 trillion.

Donald Trump’s Economic Policies:

Tax Cuts and Jobs Act (TCJA) Extension

In 2017, Trump’s TCJA significantly reduced the corporate tax rate from 35% to 21%, the largest corporate tax cut in U.S. history. It also lowered individual tax brackets, with the top bracket decreasing by 2.6%. However, the individual tax cuts are set to expire in 2025 unless extended by Congress. Trump’s campaign has focused on making these cuts permanent. The TCJA also doubled the Child Tax Credit from $1,000 to $2,000 per child.

A key provision was the State and Local Tax (SALT) cap, which limited deductions for state and local taxes to $10,000. For example, if someone paid $8,000 in state income taxes and $6,000 in property taxes (totaling $14,000), they could deduct only $10,000 under the SALT cap, resulting in a higher federal tax bill.

Pros: The TCJA was designed to stimulate greater economic output, with individuals spending more on goods and services, which in turn would increase business production. Proponents argued it would lead to job creation and higher wages due to corporate savings being reinvested in the economy.

Cons: Critics argue the act primarily benefits the wealthy, worsening income inequality. It is also predicted to increase the national deficit by over $1 trillion.

Written by Riya Kalapurakkal