How Harris’ and Trump’s Tax and Spending Plans Impact US Debt

By David Lawder

WASHINGTON – Vice President Kamala Harris and her Republican challenger Donald Trump have introduced new tax incentives and spending proposals aimed at convincing Americans that their initiatives will alleviate financial challenges.

Budget analysts are grappling with the recent adjustments, and more ideas may be shared in the upcoming debate on Tuesday. However, current projections indicate that Trump’s proposals could significantly increase federal debt.

Trump intends to extend the tax cuts he successfully pushed through Congress in 2017, exempt Social Security and tip income from taxation, and further reduce corporate income taxes. Estimates suggest that these measures could increase the U.S. primary deficits by between $3.6 trillion and $6.6 trillion over the next decade, based on assessments from several budget forecasters, including the Penn-Wharton Budget Model and the Committee for a Responsible Federal Budget (CRFB).

In contrast, Harris’ proposals—which feature an expansion of the Child Tax Credit, a $6,000 bonus tax credit for newborns, a $25,000 tax credit for first-time homebuyers, and the removal of taxes on tips—could either decrease deficits by up to $400 billion or add as much as $1.4 trillion to them over ten years, according to the same forecasters.

The estimates derive from static budget scoring and are grounded in the Congressional Budget Office’s current projections, which already anticipate a staggering $22 trillion increase in debt by 2034.

FORECASTS IN FLUX

The estimates fluctuate significantly based on the inclusion of various proposed measures. For instance, Harris’s recently announced tax deduction for business startup costs, which could be as high as $50,000, and a lower top capital gains tax than the one suggested by President Joe Biden are often excluded from the forecasts.

Trump’s proposal to cut the corporate income tax to 15% from 21% is usually factored in, though his recent comments suggesting this rate would apply solely to companies manufacturing in the U.S. have not been included.

"The campaign talking points are evolving faster than the budget models," remarked Shai Akabas, economic policy director for the Bipartisan Policy Center. "We’re witnessing a trend where candidates prioritize their popular policy proposals over fiscal responsibility on both sides."

Ultimately, Congress will need to approve any tax and spending legislation, which complicates the winner of the November 5 election’s ability to deliver on their promises without substantial majorities in both the Senate and the House.

THE 2025 TAX EXPIRATION

A key point of divergence between Trump and Harris involves the expiration of individual tax cuts enacted by Republicans during Trump’s presidency in 2017, which is set to occur in 2025 unless Congress takes action. Trump has committed to permanently extending all of these tax cuts, including for high earners, which would likely result in a revenue reduction of about $3.3 trillion to $4 trillion over a decade.

Harris’s approach would extend the tax cuts for individuals earning less than $400,000, consistent with Biden’s pledge, but this could still add approximately $2.5 trillion to an already projected $2 trillion spending agenda over a decade.

Harris has tentatively supported nearly $5 trillion in tax increases included in Biden’s fiscal 2025 budget request, which entails taxing unrealized gains for fortunes exceeding $100 billion and raising the corporate tax rate to 28%. This stance has raised concerns on Wall Street but would significantly alleviate the financial burden of her spending initiatives.

"I think it is accurate to say that Trump’s tax strategy is more debt-driven," stated Steve Rosenthal, a senior fellow at the Urban-Brookings Tax Policy Center. "Harris, on the other hand, has proposed more coherent revenue-raising options."

In contrast, Trump has not suggested any traditional tax increases to counterbalance his tax cuts. Other measures, such as exempting Social Security income, could lead to a revenue loss of around $1.6 trillion, according to estimates from CRFB and the Tax Foundation. The Tax Foundation criticized this approach as "unsound and fiscally irresponsible," arguing that it undermines Social Security and Medicare.

Trump claims that his tax cuts could be financed through "trillions of dollars" generated by enhanced economic growth, new import tariffs, the elimination of Biden’s clean energy subsidies, and a new efficiency initiative led by billionaire entrepreneur Elon Musk.

The Tax Policy Center has estimated that Trump’s proposed global tariffs—10% overall and 60% specifically on Chinese imports—could yield up to $3.8 trillion over a decade, though it would also result in a decrease in other revenue streams due to economic repercussions, effectively acting as a tax on households. The Tax Foundation was the only model reviewed that estimated the tariff’s impact as an offset but still projected that Trump’s agenda would increase deficits by nearly $4 trillion over ten years.