The election for president of the United States will be held tomorrow. While Republican candidate, former President Donald Trump’s economic policy proposals are generally known, Democrat candidate Vice President Kamala Harris’ proposals are somewhat vague. When Harris does give specifics, most economists scratch their heads.
Harris will allow the 2018 tax cuts to expire, which raises every household’s tax bill by more than 10%. She does, however say, without specifics, that she will cut taxes for 100 million middle class households.
Trump will extend those tax cuts indefinitely. While the Harris camp paints that as a tax cut for the wealthy, the truth is far different.
The 2018 tax cuts were, in my opinion, very fair. Every taxpayer was treated the same. Each received a 10% tax cut. Obviously, a wealthy household that pays $1million in taxes received a $100,000 tax cut. A middle-class household who pays $5,000 in taxes received a $500 tax cut. But every taxpaying household was treated exactly the same.
Harris says she will reduce inflation by not allowing companies to raise prices. She believes that corporations, especially grocery companies, “price gouged” to cause the inflation we are all experiencing. Harris apparently doesn’t understand that prices are set by the marketplace, not by any individual or group of companies. Even her own economists question this.
Trump says he will reduce inflation by dramatically increasing the supply of U.S. energy. Energy costs directly affect about 8% of the consumer price index. Indirectly, energy costs affect a greater share of the Consumer Price Index (CPI) since it impacts the cost of production for every good and service produced or provided.
Harris wants to increase the tax deduction for new businesses from $5,000 to $50,000. That $45,000 increase in the tax deduction will result in about a $9,000 tax savings for businesses newly incorporated that pay the 21% tax rate. After the small one-time tax savings, she doesn’t offer anything more.
Trump will make it easier for companies to start up and grow by reducing regulations and by decreasing the cost of capital. Scaling back capital cost can also be achieved by encouraging more capital formation through lowering tax rates for those entities that create capital.
Housing costs are particularly high for all Americans. Harris wants taxpayers to give $25,000 to each new homebuyer to help with the down payment. That will have little impact for someone trying to purchase a new home which has a median price of more than $425,000 today and carries a 7% mortgage rate.
She then says she will enforce a policy so that an additional 3 million new homes will be built in the next four years, although she doesn’t say exactly what that will be.
Trump will increase the supply of new homes by having federal lands available to home builders at reasonable prices. The increase in supply will put downward pressure on home prices. He will also move to eliminate counter-productive regulations that drive up home-building costs.
Harris says she will have an “opportunity agenda” for Black men. Assuming that is legal and is not discrimination against non-Black men and all women, she will essentially have taxpayers make loans to Black men that do not have to be repaid, meaning taxpayers foot the bill.
She is not specific about how she will build an opportunity economy.
Harris says she will expand tax credits for certain people. Parents will get a $6,000 tax credit for newborns in their first year of life. If a household is in the 10% tax bracket, that will save the parents a whopping $600. She also wants to restore the pandemic-era tax credit of $3,600 for middle =-class and lower-class families.
For a family in the 10% tax bracket that will save $360.
Harris has also said she will raise the minimum wage, like what many states have already done. While this helps those working for a minimum wage, it adds to unemployment and forces companies to either raise prices, lay off workers, or go out of business.
Her economic policies are all geared to a small tax savings for households. Letting the 2018 tax cuts expire will result in a larger tax increase.
Harris’ policies may sound appealing, but they are counter-productive, leading to more taxpayer funding giveaways which will tend to reduce economic growth.
Harris’ policies will not create an opportunity economy. In fact, if she raises taxes on the highest income earners, as she says she will, that will reduce capital formation, drive up the cost of capital and slow economic growth.
Kamala Harris’ economic policies are simply wrong for America.
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Michael Busler is a public policy analyst and a professor of finance at Stockton University in Galloway, New Jersey, where he teaches undergraduate and graduate courses in finance and economics. He has written op-ed columns in major newspapers for more than 35 years.