Comparing the Trump and Harris Tax Proposals: How it Affects Corporations, Individuals & Estates

In the 2024 presidential race, tax policy is a pivotal issue with both Donald Trump and Kamala Harris offering contrasting approaches to corporate, individual, and wealth taxes.

While Trump’s plan largely seeks to preserve and expand the tax cuts introduced during his presidency in 2017, Harris proposes significant reforms aimed at increasing taxes on wealthier individuals and large corporations.

Both candidates claim their policies will stimulate economic growth, but they target different sectors and income groups. This blog explores the key tax proposals of each candidate, comparing how their plans may impact corporations, individuals, and capital gains.

Corporate Taxes: Trump vs. Harris

Donald Trump’s Corporate Tax Proposal

Donald Trump’s corporate tax plan focuses heavily on promoting domestic production by offering a significant tax cut to companies that manufacture goods exclusively in the U.S. Under his proposal, the corporate tax rate would drop from 21% to 15%, but only for firms that limit their production to within the country.

This plan is designed to encourage companies to move jobs back to the U.S. and strengthen domestic supply chains. Large manufacturers like General Motors, Boeing, and Caterpillar stand to benefit greatly from this tax cut due to their established U.S. operations. However, the narrow focus on companies that exclusively produce domestically could limit the number of businesses that qualify, especially those relying on global supply chains.

• Key beneficiaries: Large U.S. manufacturers
• Limitations: Companies must produce exclusively in the U.S. to qualify

This policy may disproportionately benefit large corporations over smaller businesses. Large companies often have the financial flexibility to shift operations or expand domestic production, allowing them to take full advantage of the tax break. In contrast, smaller companies may lack the resources to adapt their supply chains or production processes to meet the requirements, putting them at a disadvantage.

For companies that do not meet the above criteria, Trump proposes reducing the corporate tax rate from 21 percent to 20 percent, according to Politico.

Kamala Harris’ Corporate Tax Proposal

On the other hand, Kamala Harris proposes a corporate tax increase that reverses part of the cuts introduced by the 2017 Tax Cuts and Jobs Act (TCJA). She plans to raise the corporate tax rate from 21% to 28%, applying this rate to all corporations, regardless of size.

The intent behind this increase is to ensure that large corporations, that have benefited most from the TCJA, “pay a fairer share of taxes”. Harris’s plan aims to raise federal revenue to fund various social and economic initiatives, including expanded tax credits for working families.

Critics of Harris’ proposal argue that increasing the corporate tax rate could discourage corporate investment, especially in capital-intensive sectors like technology and manufacturing. Higher taxes may reduce profit margins, making it less appealing for companies to reinvest in their businesses, hire new employees, or expand operations. This could slow down economic growth and potentially drive some companies to relocate to countries with lower tax rates​.

• Potential risks: Reduced corporate investment, potential relocation abroad

While Harris’ plan would apply across the board, it’s part of a broader tax policy that includes relief for middle- and lower-income families, which could indirectly support smaller businesses by boosting consumer spending. However, the blanket increase in corporate taxes would still affect all companies, regardless of their size.

Individual Income Taxes: Trump vs. Harris

Donald Trump’s Individual Income Tax Proposal

Donald Trump’s individual income tax policy centers around making the 2017 Tax Cuts and Jobs Act (TCJA) permanent.

Under the TCJA, the marginal tax rates were lowered across all income levels, benefiting taxpayers in each bracket. For example, the tax rate for individuals earning between $9,951 and $40,525 dropped from 15% to 12%, while those in higher brackets—earning over $518,400—saw their tax rate reduced from 39.6% to 37%. With these reductions, a middle-class household might save a few hundred dollars annually; wealthy individuals often save tens of thousands of dollars or more​.

Trump’s tax policies also include proposals to exempt Social Security benefits and tips from income taxes. This would provide some additional relief to retirees and tipped workers, but the bulk of the benefits from making the TCJA cuts permanent would still flow to higher earners. By locking in these cuts, Trump argues that long-term economic growth will follow, but critics argue it could lead to increased deficits and income inequality.

Kamala Harris’ Individual Income Tax Proposal

Kamala Harris’ individual tax plan is focused on reversing some of these cuts, particularly for wealthier individuals. Harris plans to restore the top marginal tax rate to 39.6 percent for individuals earning more than $400,000 annually.

She also proposes expanding the net investment income tax and the Medicare tax, which would both apply more heavily to high earners. Specifically, Harris seeks to raise the Medicare tax on income above $400,000 to 5 percent, up from the current rate of 3.8 percent.​

Investment income refers to earnings from financial assets such as stocks, bonds, and mutual funds. It typically comes in two forms: dividends (profits paid out to shareholders) and capital gains (profits from selling an asset for more than you paid for it). These earnings are often taxed at lower rates than regular wages. For instance, long-term capital gains (investments held for more than a year) are usually taxed at a maximum of 20 percent, which is lower than the top income tax rate of 37 percent.

Kamala Harris’ plan seeks to tax long-term capital gains and dividends at ordinary income rates (up to 39.6 percent) for individuals earning over $1 million. This would ensure that high earners pay the same tax rate on their investment income as they do on wages, reducing the tax advantages that individuals currently enjoy from their investments​.

Capital Gains and Wealth Taxes: Trump vs. Harris

Donald Trump’s Capital Gains Tax Proposal

Trump has not introduced specific policies targeting capital gains or wealth taxes, instead focusing on making the estate tax cuts permanent from the 2017 TCJA.

The TCJA significantly increased the lifetime estate and gift tax exclusion to $12.92 million per person (or $25.84 million for couples). This means individuals can transfer up to these amounts, either during their lifetime or at death, without paying federal estate taxes. However, should this proposal not pass, the exclusion is set to revert to the pre-TCJA levels at the end of 2025, cutting the exemption in half to about $5 million per person.

Kamala Harris’ Capital Gains Tax Proposal

On the other hand, Kamala Harris aims to tighten these estate tax rules and increase taxes on large capital gains for individuals with significant wealth. Specifically, her plan proposes taxing unrealized capital gains at death for estates exceeding $5 million (or $10 million for couples). This means that wealth passed on to heirs would be taxed at the time of death, rather than only when the heirs sell the assets, triggering capital gain taxes.

For example:

• Current law: If someone bought a stock for $100,000 and it grew to $1 million at the time of their death, their heir would inherit the stock with a value of $1 million. If the heir later sells it for $1.2 million, they would only owe capital gains tax on the $200,000 difference (the gain after the inheritance).
• Under Harris’ proposal: The deceased person’s estate would pay capital gains taxes on the unrealized $900,000 gain (from $100,000 to $1 million) at death, and the heir would still owe tax on any additional gain above $1 million when they eventually sell.

Similarities Between Trump and Harris’ Tax Proposals

While Donald Trump and Kamala Harris differ on many aspects of tax policy, there are a few areas where their proposals align. Here are three key commonalities:

1. Exempting Tips from Income Tax: Both Trump and Harris support exempting tips from income taxation, which would directly benefit workers in the service industry. In industries like restaurants, hospitality, and other tip-reliant jobs, this policy aims to reduce the tax burden on lower-wage earners who rely heavily on gratuities as part of their income. The proposal is particularly relevant in states where workers receive lower base wages because tips make up the majority of their earnings​.
2. Tax Relief for Working-Class Americans: Although they approach it differently, both candidates prioritize offering some form of tax relief to working- and middle-class families. Trump has proposed increasing the Child Tax Credit, while Harris has focused on expanding and making the credit fully refundable. Both are aimed at increasing the disposable income of working families.
3. Targeted Tax Incentives for Specific Sectors: Both Trump and Harris have proposed targeted tax breaks aimed at specific sectors to achieve broader economic goals. Trump focuses on offering reduced corporate tax rates for companies that engage in domestic manufacturing, while Harris promotes tax incentives for sectors like green energy and infrastructure. Both strategies aim to stimulate particular areas of the economy through the tax code.

In summary, Donald Trump and Kamala Harris present two distinct visions for the future of tax policy in America. As voters evaluate these tax plans, it’s clear that the next administration’s tax policy could significantly reshape the U.S. economy for years to come.

Sources:

Tax Foundation – Analysis of Trump and Harris Tax Plans
https://taxfoundation.org

Politico – Tax Policies for 2024 Election
https://www.politico.com

Tax Policy Center – Detailed Breakdown of Trump and Harris Tax Proposals
https://www.taxpolicycenter.org