Harris Struggles to Balance Tax Issues Effectively

Vice President Harris is making headlines with her latest proposal to raise the capital gains tax for high earners, which she’s adjusted to 28 percent from the previously supported 39.6 percent by the Biden administration. This shift is viewed by some Democrats as a strategic move to appeal to voters who might perceive her as overly liberal or antagonistic towards the business sector.

The Trump campaign has characterized Harris as a deeply progressive figure, citing her earlier presidential campaign positions from 2019 aimed at courting liberal voters. However, as the Democratic nominee, Harris appears to be pivoting toward more moderate policies, notably stepping back from her earlier call to ban fracking—an issue of significant importance in the crucial swing state of Pennsylvania.

Democratic strategists emphasize that Harris’s adaptation of her tax proposal is an effort to counteract criticisms from former President Trump. By proposing a more moderate capital gains tax, Harris hopes to reassure business communities that she understands their concerns. Anthony Coley, a Democratic strategist, points out that this new proposal not only demonstrates that Harris is not the progressive “bogeyman” that some Republicans paint her to be, but it also serves to communicate her recognition of business interests.

Coley stated, “With this announcement, she is sending a signal to the business community that she is not the bogeyman that the right paints her out to be, and that is more important in some ways than the policy.” However, the response from within her own party has been mixed. Some Democrats argue that Harris should have considered an even lower rate or taken other measures to distinguish herself more clearly from the Biden administration.

One notable Democratic donor expressed skepticism about the timing and effectiveness of the tax proposal, questioning who it ultimately serves. “My guess is the business community will say, ‘Why are you f‑‑‑ing with capital gains?’ The progressives’ view is, ‘Why are you giving them a break from Biden’s plan?’” This uncertainty regarding her audience suggests a lack of consensus on the effectiveness of her approach.

Another donor opined that the proposal does not resonate with the broader economic issues that voters care about. “It doesn’t lower prices. It doesn’t put a cent in people’s pockets,” they noted, adding that while it does set Harris apart from Biden, the distinction may not carry substantial weight.

While the left has thus far remained relatively quiet regarding Harris’s centrist moves, there is awareness of the importance of uniting to defeat Trump. Democratic strategist Rodell Mollineau recognized that election imperatives often overshadow policy preferences during campaign periods. “We’re in campaign mode. There’s what you want to say, and what’s reality,” he remarked.

In a conciliatory tone, Democratic lawmakers have acknowledged the balance Harris is trying to strike with her tax plan. Representative Don Beyer (D-Va.) commented that Harris is working to find a reasonable compromise that responsibly raises revenue while considering congressional realities.

Despite the backlash, not all voices in the financial community view the capital gains tax increase negatively. David Oh, head of tax and estate planning at Arta Finance, reflected on the existing advantages of the current capital gains tax system, saying, “We’re dealing with a tax that’s already sort of a tax break for taxpayers.” He also pointed out that the familiarity of setting the rate at 28 percent may hold appeal due to historical precedents.

During this week, Harris also unveiled a number of proposals aimed at bolstering the economy, including increasing the tax deduction limit for startup businesses from $5,000 to $50,000, providing low-interest loans to small businesses, and increasing federal contracts awarded to smaller enterprises. Sources connected to the Harris campaign have indicated that endorsements from various business leaders are expected to be released shortly, further illustrating her commitment to engaging with the business community.

As significant portions of the U.S. tax code approach expiration at the end of next year, the results of the upcoming November elections will play a crucial role in shaping tax policy and addressing potential expirations. While capital gains tax revisions may not deliver robust revenue compared to changes in income tax rates, they still hold implications for national debt and deficit management.

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