Factbox: Kamala Harris’ Economic Plans on Taxes, Childcare, and Housing

Economic Proposals from Vice President Kamala Harris

Overview

U.S. Vice President Kamala Harris has unveiled a series of economic initiatives aimed at reducing living costs for middle and lower-income Americans while enhancing the overall economy. These proposals leverage tax incentives and other tax adjustments.

Some of her plans build on President Joe Biden’s previously stated economic objectives but broaden their scope and impact.

Taxation on the Wealthy

Harris has reiterated Biden’s commitment not to increase taxes on households earning less than $400,000 annually. She has endorsed much of the nearly $5 trillion in tax increases proposed in Biden’s fiscal 2025 budget, which includes raising the top income tax rate from 37% to 39.6%.

Key components of this plan involve a new 25% minimum tax on individuals with wealth exceeding $100 million, encompassing unrealized capital gains. For those with annual incomes over $1 million, Harris suggests increasing the long-term capital gains tax rate from 20% to 28%, which is less drastic than Biden’s proposed top income tax rate of 39.6%.

Corporate Tax Changes

Harris plans to raise the corporate tax rate to 28%, partially reversing the 2017 tax cuts implemented during Trump’s administration that lowered corporate tax rates from 35% to 21%. This change is projected to generate about $1 trillion for the federal government over the next decade, although it could impact corporate profits, according to Wall Street analysts.

A recent analysis showed that major U.S. corporations currently pay an effective tax rate averaging 16%, significantly lower than their international counterparts.

Child Tax Credit Initiatives

Harris aims to make permanent the temporary increase in the Child Tax Credit introduced during the COVID-19 pandemic, which currently allows for up to $3,600 per child, compared to the standard $2,000. This increase is scheduled to revert to $1,000 after 2025. Additionally, she proposes a one-time $6,000 credit for families with newborns.

While Trump’s former running mate has suggested raising the annual Child Tax Credit to $5,000, this has not been formalized as a policy proposal.

Affordable Housing Measures

Harris has outlined strategies to stimulate construction and reduce costs for renters and homebuyers, primarily through tax incentives. Proposed measures include tax credits for builders of homes aimed at first-time buyers and affordable rental units, as well as a $25,000 tax credit to assist first-time buyers with down payments over the next four years.

She also proposes a $40 billion "innovation fund" to motivate local governments to develop more affordable housing, doubling Biden’s previous budget proposal for competitive grants to local governments demonstrating effective results. The objective is to achieve a goal of increasing U.S. housing construction by 3 million units over the next four years, amid a rising housing crisis marked by a 50% increase in home prices and a 35% rise in rents over the past five years.

Small Business Support

In a departure from Biden’s economic strategy, Harris advocates for a new tax deduction of up to $50,000 for startup costs incurred by new small businesses. This initiative seeks to encourage entrepreneurship and offers a contrast to Trump’s tax cuts for larger corporations. According to the Small Business Administration, small businesses account for 70% of net new jobs created since 2019.

Currently, the existing tax deduction for small business startup expenses caps at $5,000, which is significantly lower than the average startup cost of $40,000.

Childcare Affordability

Harris has expressed a commitment that no working family should pay more than 7% of their household income on childcare. Presently, parents are facing childcare costs as high as 19.3% of median family income per child, according to labor statistics. This 7% target aligns with the Child Care and Development Block Grant program, which currently supports about 1 million children from low-income families. However, details on how this childcare plan will be structured have not been provided.

Combatting High Grocery Prices

Harris has vowed to implement what would be the first-ever federal prohibition on price gouging for food and groceries. This initiative seeks to protect consumers from corporations that significantly raise prices for profit, although the exact definition of excessive price increases has yet to be clarified. Some proposals in Congress indicate a potential pathway for this initiative’s enactment.