Democratic presidential candidate Kamala Harris has released an ambitious economic agenda that includes significant expansions to family tax credits, a tax exemption for tip income, and a commitment not to raise taxes on those earning less than $400,000. She plans to help fund these initiatives with a series of tax increases targeting high-income individuals and corporations. 

But the biggest unknown remains how Harris would address expiring provisions of the 2017 Tax Cuts and Jobs Act (TCJA) after 2025. If Harris keeps her no-tax increase pledge and extends TCJA provisions for those earning less than $400,000 a year, the net cost of her tax-cutting proposals would increase significantly. This is especially challenging when the federal debt is about 100 percent of GDP and growing, along with the costs of addressing it. 

Tax cuts for families

Harris’s proposed tax cuts could cost approximately $3 trillion over the next decade. Here’s a breakdown.

• Child Tax Credit (CTC) expansion: Increasing the CTC to $3,600 for children under six and $3,000 for those aged six to 17, along with a higher credit of $6,000 for families with newborns, could cost approximately $1.6 trillion over ten years, according to TPC estimates.
• Earned Income Tax Credit (EITC) expansion: TPC estimates that enhancing the EITC would cost approximately $140 billion over a decade. 
• Enhanced Affordable Care Act (ACA) Premium Tax Credit extension: Making enhancements under the American Rescue Plan Act of 2021 and Inflation Reduction Act of 2022 permanent is estimated to cost around $400 billion over ten years.
• First-Time Homebuyer Assistance: Providing $25,000 in first-time homebuyer assistance, if structured as a refundable tax credit, could cost up to $294 billion over ten years, according to TPC estimates.
• Low-Income Housing Tax Credit (LIHTC) expansion: The Harris-Walz campaign has proposed expanding the LIHTC by an additional $100 billion over ten years in an effort to add 1.2 million more affordable homes.
• Tip income exemption: Exempting tip income from federal income tax could cost between $135 billion and $265 billion over ten years. TPC estimates exempting tips from income tax would reduce federal revenue by $6.5 billion in 2025, while capping the benefit to those making $75,000 or less would limit the revenue loss to $3.2 billion. Exempting both income and payroll tax for all tips would boost the 2025 cost to $13.5 billion.

The total estimated cost of these proposals is more than $2.8 trillion. Additional measures, including Harris’ proposed expansion of the eligible start-up expenses deduction from $5,000 to $50,000 and a still-to-be-defined tax credit for key industries, could push the overall figure beyond $3 trillion.

Tax increases for the wealthy and corporations

Similar to past Biden-Harris proposals and the administration’s fiscal year 2025 budget, Harris calls for several tax increases targeting the wealthy and corporations to help cover the costs of other initiatives. These measures are projected to raise over $2 trillion over ten years.

• Increase in top marginal income tax rate: Allowing the top rate to revert to 39.6 percent for incomes above $400,000 could generate approximately $170.5 billion over ten years relative to current law.
• Expansion of the Net Investment Income Tax: Increasing the rate to 5 percent for incomes above $400,000 is expected to raise an additional $383.5 billion over ten years.
• Capital gains and dividends tax: Taxing long-term capital gains and dividends at 28 percent for those with incomes over $1 million, along with taxing unrealized gains at death, could contribute around $171.8 billion over ten years.
• Corporate tax rate increase: Raising the corporate tax rate from 21 percent to 28 percent could yield approximately $1.1 trillion over ten years.
• Stock buyback excise tax: Quadrupling the stock buyback tax from 1 percent to 4 percent could generate $150 billion over ten years.
• A minimum tax on unrealized capital gains of wealthy taxpayers: Treasury estimates that a 25 percent minimum tax on unrealized gains for individuals with net worth exceeding $100 million could raise $500 billion over ten years, but because it is a new type of tax the amount it would raise is highly uncertain.

While it is common for political campaigns to emphasize the politically popular aspects of their agenda, the mismatch between the campaign’s proposed tax breaks and revenue increases would add another wrinkle to next year’s debate over the long-term fate of the TCJA and the trajectory of federal deficits.