Where they stand: Trump and Harris on the economy

Could either of them curb inflation?

Good morning! It’s Tuesday, October 29, 2024. Election Day is one week away.

It’s time for the second installment of my series breaking down the policy agendas of both presidential candidates. Today, we’re tackling taxes and the economy, with help from Howard Gleckman, a senior fellow at the Tax Policy Center.

As always, my goal is for WUTP be accessible for everyone — no matter your prior knowledge on a topic. In today’s issue, you’ll find footnotes next to terms that might not be widely known; there, you can find explanations for what they mean if you’re looking for more context.

Coming up later in the week: Policy breakdowns on foreign policy, health care, education, housing. If you have questions on the candidates’ plans on these issues, email me or leave a comment below.

If you want to support my non-partisan policy coverage, you can upgrade to a paid subscription — or click the “heart” button at the top of the email.

Let’s dive in!

As is almost always the case, the economy is the top issue for voters in the 2024 election — and nothing else comes particularly close. Per Gallup, 68% of Harris supporters and 93% of Trump supporters say the economy will be “very important” to their vote next week; no other issue commands such bipartisan passion.

Despite the attention paid to economic policy in every campaign, there is only so much presidents can do to move the American economy one way or another. Still, no matter who is elected this year, the next president will have at least one big opportunity to shape the country’s fiscal landscape — courtesy of a looming $5 trillion deadline.

Most of Donald Trump’s signature tax cuts from the Tax Cuts and Jobs Act of 2017 are set to expire at the end of 2025; that means whoever controls the White House and Congress next year will have the opportunity to leave a major imprint on the tax code. Here’s how the two candidates plan to address the “tax cliff” and other economic questions:

Where they stand.

Trump has promised to make his 2017 tax cuts permanent — while also proposing a slew of additional tax cuts geared at specific groups of Americans, including ending taxes on Social Security benefits, overtime pay, auto loan interest, and Americans who live abroad and already pay taxes elsewhere. Trump has also signaled support for ending the $10,000 cap on the state and local tax (SALT) deduction that was imposed by his 2017 law¹ and reportedly told CEOs that he would reduce the corporate tax rate from 21% to 20%.

Recently, including on Joe Rogan’s podcast, Trump has been musing about ending the federal income tax altogether, envisioning a return to 19th-century America, when the country’s revenue was largely derived from taxing imports. To that end, Trump has proposed a 60% tariff on goods from China and up to 20% on imports from all other countries.²

However, economists are almost uniformly skeptical that increased tariffs would make up the revenue lost by eliminating income tax. “A 20% worldwide tariff would raise about $4.5 trillion in net new revenues over the next 10 years,” the Tax Policy Center’s Howard Gleckman told me. “The individual income tax, under current law, would generate about $34 trillion [over the same time period.] Do the math: even with 20% worldwide tariffs, he’d still be $30 trillion short of replacing the income tax with a tariff.”

Speaking at the Economic Club of New York last month, Trump also emphasized regulatory reform — pledging to eliminate ten old regulations for every new one — and announced plans to appoint Elon Musk as head of a Government Efficiency Commission “tasked with conducting a complete financial and performance audit of the entire federal government and making recommendations for drastic reforms.”

Kamala Harris, meanwhile, has not specified which of the Trump tax cuts she would extend and which she would undo, although she has called for increasing the corporate tax rate from 21% to 28%, increasing the top individual income tax rate from 37% to 39.6%, and increasing the Medicare tax rate from 3.8% to 5% for households making more than $400,000 a year — all steps aimed at raising taxes on wealthier Americans.

As for everyone else, Harris has promised not to raise taxes on anyone making less than $400,000 a year. Again, Gleckman was skeptical. “I think it’s not possible to literally write a tax law where nobody making less than $400,000 a year would pay more in taxes,” he told me, although he said it was likely possible to achieve that goal for most people in the category. “People’s tax situations are so different and so complicated that actually trying to write a law that would do that is impossible.”

Other elements of Harris’ economic plan include a federal ban on price gouging³, a $50,000 tax deduction for startup expenses for new small businesses. Like Trump, she has also issued proposals aimed at specific constituencies, including a promise to provide “1 million loans that are fully forgivable of up to $20,000 to Black entrepreneurs and others who have historically faced barriers to starting a new business or growing an existing business.”

Harris has said little about tariffs throughout the campaign. “She hasn’t even said anything about whether she’d continue the Biden tariffs⁴,” Gleckman pointed out. “She’s been completely quiet about this.”

Where they overlap.

The most notable economic policy that Trump and Harris have in common is calling for tips to be exempt from federal taxes, something Trump proposed in June and Harris endorsed in August. Both candidates embraced the idea while speaking in the swing state of Nevada — the state with the most tipped workers per capita — a reflection of the fact that most economists view the proposal as more political pandering than serious policymaking.

“It’s weird because, if you really cared about low-income workers, why would you select only tipped workers to help out?” Gleckman said. “One of the principles of good tax policy is was what we like to call ‘tax equity,’ or horizontal equity, and the idea is that people making the same income should generally pay the same tax… For example, take somebody who works in a warehouse for salary and somebody who’s a tipped worker. Why would you want to give that tipped worker tax-free income and not give it to a warehouse worker who’s making the same money? It just doesn't make any sense.”

In addition, one of Harris’ key proposals is permanently expanding the Child Tax Credit (CTC) to $3,600 per child.⁵ Trump has not said if he would support expanding the CTC, which his 2017 law raised to its current level of $2,000 — but his running mate, JD Vance, has endorsed raising the tax credit to $5,000 since joining the GOP ticket, signaling that a Trump administration would also move on the issue.

In a similar vein, Harris has proposed supplementing the CTC with a new $6,000 tax credit that would go to “middle-income and low-income families for the first year of their child’s life.” Trump, meanwhile, has called for “major newborn expenses” to be made tax-deductible, although he has not detailed his proposal further.

Finally, both Trump and Harris have made proposals aimed at the so-called “sandwich generation” (those caring for both their children and their parents): Harris unveiled a plan this month that would allow Medicare to cover home care for seniors, while Trump on Sunday announced support for a “tax credit for family caregivers who take care of a parent or a loved one.”

Other than those proposals, though, Gleckman said that fiscal similarities between the two candidates were few and far between: “Trump would lower corporate tax rates. She’d raise corporate tax rates. Trump would lower individual income tax rate. She’d raise individual income tax rates. [In most areas] not only do they not overlap, they’re going completely different directions.”

What they aren’t talking about.

Well, there is one more direction Trump and Harris are both rowing in: towards vastly higher deficits⁶ — something neither of them acknowledge on the campaign trail.

According to estimates by the non-partisan Committee for Responsible Federal Budget, Harris’ campaign proposals would increase the national debt by nearly $4 trillion through 2035, while Trump’s proposals would increase the debt by nearly $8 trillion over the same time period.

That was the answer I expected Gleckman to give when asked for the candidates’ blindspots. His next one, though, I didn’t see coming: inflation. But, wait, haven’t both candidates been talking ad nauseam about bringing prices down? Well, sure, Gleckman said — but neither of them have put forward a plan to do it.

“The tariffs would increase prices,” Gleckman told me, reeling off a list of Trump’s proposals. “The increase in the budget deficit would increase prices. The overall tax cuts would increase prices. And his talk about somehow having additional influence on the Federal Reserve⁷ would likely make it harder for the Fed to fight inflation and result in increased prices.”

Harris may not have proposed as many inflationary policies — but she hasn’t put forward any proposals to “continue the trend of lowering inflation” and tackling the underlying issues, Gleckman said. “She says she’s going to provide subsidies to people so they can better manage high prices,” he continued, “but she’s not doing anything about actually creating policy that would consistently keep inflation down.”

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More news to know

Law enforcement attempting to recover ballots at the burned box in Vancouver, Washington. (Source: KATU)

Officials are investigating a pair of fires at ballot drop boxes in Portland, Oregon, and Vancouver, Washington. The fire in Portland only damaged three ballots — but hundreds of ballots were damaged in the fire in Vancouver, which is home to one of the most competitive House races in the country.

Comedian Tony Hinchliffe’s offensive set at Trump’s Madison Square Garden rally — which included calling Puerto Rico a “floating island of garbage — has sparked backlash among Puerto Ricans, including the 470,000 who live in the key state of Pennsylvania. “We have to stop getting so offended at every little thing,” JD Vance said when asked about the joke on Monday. (Also: Hinchliffe’s set was originally going to include calling Harris the c-word.)

Harris advisers have concluded that a joint event with Biden would “only hurt her” in the closing stretch of the campaign.

NYT’s Mark Landler: “As the dust settles from Israel’s latest military strikes against Iran, analysts and former diplomats say one thing is clear: Israel, for better or worse, is dictating events in the Middle East. The United States has been relegated to the role of wing man, as its ally wages war on multiple fronts.”

In another loss for global incumbents, Japan’s Liberal Democratic Party failed to win a majority in the lower house of the country’s parliament for the first time in 15 years.

Jill Stein’s running mate was part of a hip-hop duo that released an album celebrating the October 7th attacks.

More than 200,000 Washington Post readers have canceled their digital subscriptions since the paper’s editorial board announced it would forgo a presidential endorsement.

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The day ahead

Vice President Kamala Harris will deliver her closing arguments at a rally on The Ellipse in Washington, D.C. She will also give interviews with local TV stations in Detroit, Milwaukee, Philadelphia, and Pittsburgh, as well as an interview with a Spanish-language radio station in Pennsylvania to reach Puerto Rican votes.

• Gov. Tim Walz will hold rallies in Savannah and Columbus, Georgia.

Former President Donald Trump will hold a press conference at Mar-a-Lago and a rally in Allentown, Pennsylvania.

• Sen. JD Vance will hold events in Saginaw and Holland, Michigan.

President Joe Biden will travel to Baltimore to announce nearly $3 billion in grants to reduce carbon emissions at U.S. ports.

The House and Senate are on recess.

The Supreme Court has no oral arguments this week.

1. The SALT deduction allows Americans who itemize their tax returns to deduct state and local taxes from their federal tax bill. Thus, repealing the cap would benefit Americans in high-tax states, which is why vulnerable Republican lawmakers in New York have been pushing Trump on the issue.

2. If a tariff is placed on a foreign-made product, the U.S. company that imports the product must pay the tariff to the government. Trump has argued that increased tariffs — in addition to paying for his tax cuts — will revitalize American manufacturing, as companies will opt to create more goods in America rather than import them. However, companies often choose instead to pass the cost of tariffs onto consumers, which is why many economists believe increased tariffs would raise prices.

3. Price gouging is when companies raise prices during an emergency situation; Harris’ proposed ban would apply only during “times of crisis.” The proposal polls well with voters, but many economists argue that changes in supply and demand are much more responsible for price changes than irresponsible corporate behavior.

4. Biden kept in place Trump’s tariffs on China, and even increased some of them.

5. That’s the same level that the tax credit was set at by the American Rescue Plan Act of 2021, although that expansion only lasted one year.

6. The deficit is the difference between the amount of money the government takes in and the amount of money the government spends in a given year. The debt is the total amount of money the government owes to creditors. “In theory, government borrowing crowds out private borrowing, so [when the deficit is higher] there’s less money available to invest in the economy, and the economy grows more slowly than it should,” Gleckman told me, although he acknowledged that the impact of deficits isn’t always dire.

7. Presidents traditionally grant the Fed a wide berth of independence, although Trump said earlier in the campaign that he would intervene in their interest rate decisions — a suggestion he later backed away from.