Vice President Kamala Harris is adding tax relief for small businesses to her economic policy platform aimed at helping middle-class and working Americans.
Harris is expected to unveil Wednesday a proposal to massively increase the existing small business tax deduction for startup costs and plans to suggest ways to cut the red tape that impedes small businesses’ formation and growth, according to a Harris campaign official.
Her goal: 25 million new small business applications in her first term, up from the record 19 million received under the Biden administration as of mid-August.
The measures come three weeks after Harris released a four-part package aimed at making housing, groceries, child rearing and prescription drugs more affordable. Many of the proposals build upon efforts the Biden administration has already unveiled.
Most, if not all, of Harris’ proposals would require congressional approval, which would be a significant hurdle if Capitol Hill remains as divided as it is currently.
Plus, her ideas come with significant price tags, and she has yet to detail how she will cover the costs. Her prior package would add $1.7 trillion to the deficits over the next decade, before interest, according to the Committee for a Responsible Federal Budget.
So far, her campaign has said she would increase the corporate tax rate to 28%, up from the 21% rate set by former President Donald Trump’s 2017 tax cut law – which would raise about $1 trillion over the next decade, according to the committee.
Harris has also said she supports the revenue-raising provisions in President Joe Biden’s fiscal year 2025 budget blueprint, which includes tax hikes on wealthy Americans and big companies. Overall, these measures would raise about $5 trillion.
Here’s what we know about Harris’ economic proposals:
Harris is expected to propose a 10-fold expansion to a tax deduction for new small businesses.
Currently, small businesses are allowed to deduct up to $5,000 of eligible startup expenses in the year they begin to operate, according to the Congressional Research Service.
Harris’ plan would expand the tax deduction to up to $50,000 and allow businesses to wait to claim that deduction until the year they first turn a profit to make sure they receive the full benefit, according to the campaign official.
Harris is expected to propose measures aimed at making it easier for small business owners to operate. Creating a standard deduction for small businesses could make it easier for them to file taxes. Harris also wants to make it easier to do business across state lines and to ensure that one-third of federal contract dollars goes to small businesses.
Additionally, Harris will call for boosting investment in community development financial institutions, or CDFIs, which are dedicated to serving low-income people and communities that are missed by traditional lenders. While many small businesses struggled during the Covid-19 pandemic, those owned by people of color were hit hardest.
In August, Harris unveiled a multipart, four-year plan to address the nation’s affordable housing crisis. It includes providing up to $25,000 in down-payment support and a $10,000 tax credit for first-time homebuyers.
To spur construction, Harris would provide a first-ever tax incentive for builders who build starter homes sold to first-time buyers. She also would expand an existing tax incentive for building affordable rental housing and create a $40 billion fund for innovative housing construction.
Plus, she would ban algorithm-driven price-setting tools for landlords to set rents and remove tax benefits for investors who buy large numbers of single-family rental homes.
Economists have mixed views on the effectiveness of Harris’ proposals. Incentives to build more homes should increase inventory and help drive prices down. But several experts warned that down-payment support could stimulate demand and fuel an increase in prices.
Harris’ $25,000 homebuyer credit and additional affordable housing policies would cost $200 billion over a decade, according to the Committee for a Responsible Federal Budget, which assumed these provisions would be in effect for four years.
Harris called in August for a federal ban on price gouging in an effort to lower grocery prices, though her campaign has released few details about the proposal.
More than three dozen states have laws that prohibit price gouging during special circumstances, such as emergencies, disasters or market disruptions.
However, how much price gouging contributed to the spike in inflation over the last few years remains a matter of debate, prompting some experts to question the effectiveness of a national ban.
Also included in the suite of proposals Harris unveiled in August was the restoration of the American Rescue Plan Act’s popular expansion of the child tax credit to as much as $3,600, up from $2,000. She is calling for the beefed-up credit, which was only in effect in 2021, to be made permanent.
The share of children in poverty fell by nearly half that year, thanks mainly to the temporary credit enhancement, according to the Census Bureau.
The plan would also add a new child tax credit of up to $6,000 for middle-class and lower-income families with children in their first year of life.
Beefing up the child tax credit would cost $1.1 trillion over a decade, while creating a credit for newborns would add another $100 billion to the price tag, according to the Center for a Responsible Federal Budget.
Also in August, Harris called for extending the more generous Affordable Care Act premium subsidies that are set to expire at the end of 2025. The enhancement, which was made available through the American Rescue Plan and extended by the Inflation Reduction Act, has helped push sign-ups for Obamacare coverage to record levels.
The vice president also wants to expand the current $35 monthly cap on out-of-pocket costs for insulin and the upcoming $2,000 annual limit on out-of-pocket costs for prescription drugs generally to all Americans, not just Medicare enrollees. These caps were put in place for those on Medicare in the Inflation Reduction Act. The $2,000 limit on Medicare Part D drug costs takes effect in January.
(The three major insulin manufacturers in the US offer price caps or savings programs that lower the cost of insulin to $35 for many patients – a move Biden pushed for in his State of the Union address last year.)
Harris’ plan would also accelerate the speed of Medicare’s drug price negotiations so that the costs of more medications come down faster. The Biden administration last month announced the results of the first-ever round of negotiations, which is expected to result in $6 billion in savings for Medicare and a $1.5 billion reduction in out-of-pocket costs for seniors when the lower prices take effect in 2026. Medicare gained this historic power through the Inflation Reduction Act.
In addition, Harris said she would work with states to cancel medical debt for millions of Americans and help them avoid falling behind on health care bills in the future. States and municipalities have used American Rescue Plan funds to cancel $7 billion of medical debt for up to 3 million Americans, according to the campaign. Harris has overseen the Biden administration’s efforts to remove medical debt from credit reports.
Harris also promised in August to end federal income taxes on tips, sparking Trump’s ire that she is copying his campaign promise. Tips would remain subject to payroll taxes under Harris’ plan.
Her campaign has said she supports an income limit and requirements that would prevent hedge fund managers and lawyers from being able to take advantage of the measure. She also plans to push for an increase in the minimum wage.
Read the full article here
