Impact of Trump and Harris Tax Plans on Your Paycheck Explained

Presidential hopefuls often showcase new tax proposals as part of their campaign platforms, with promises aimed at alleviating the financial strain on taxpayers. This election season, candidates Kamala Harris and Donald Trump are presenting contrasting approaches that could significantly impact voters’ paychecks.

Former President Donald Trump aims to extend the tax cuts initiated through the Tax Cuts and Jobs Act—his flagship legislation from 2017 that reduced taxes for a broad swath of Americans. However, research indicates that the wealthiest individuals benefited the most from these tax reductions. Trump’s proposals also include eliminating taxes on tips and Social Security income, alongside a reduction in the corporate tax rate.

On the other hand, Vice President Kamala Harris advocates for more substantial tax benefits for families and plans to increase the corporate tax rate. This move is intended to offset expenses related to larger tax credits she proposes to introduce.

The philosophies behind the two candidates’ proposals shed light on their divergent views regarding supporting American families and nurturing economic growth. Trump’s plan suggests tax cuts for all income brackets, although the most significant benefits would accrue to higher-income Americans. Conversely, Harris’s strategy aims to support low-income families while increasing taxes on wealthier households.

Kent Smetters, the faculty director of the Penn Wharton Budget Model at the University of Pennsylvania, explains that while Trump’s plan may appear beneficial for all, it would disproportionately favor the top 1% and 0.1%. In contrast, Harris’s proposal would place a greater burden on the wealthiest citizens.

Both plans, however, are projected to carry hefty price tags, with analysts estimating that Trump’s approach would add approximately $5.8 trillion to the federal deficit over the next decade. In contrast, Harris’s plan would add around $2 trillion, according to findings from the Penn Wharton Budget Model.

In a response to the tax plan analysis, Republican National Committee spokesperson Anna Kelly expressed confidence that Trump’s tax policies would lead to “shrinkage in deficits” and reduce long-term debt levels through federal spending cuts, increased energy production, and deregulation.

The Harris-Walz campaign has actively challenged Trump’s fiscal agenda, asserting that it could ignite a “deficit bomb.” In a statement, Harris-Walz spokesman James Singer said that despite attempts to downplay Trump during debates, the repercussions of his policies could burden the middle class, inflating costs by nearly $4,000 annually and potentially pushing the economy into a recession by the next year.

While Harris’s tax proposal might yield a lesser impact on the national deficit compared to Trump’s strategy, experts like Smetters point out that both candidates will ultimately contribute to the expanding fiscal challenges. The Congressional Budget Office forecasts that the federal budget deficit for fiscal year 2024 is expected to reach $1.9 trillion, representing a 27% rise from their previous estimates due in part to additional funding for Ukraine, Israel, and other nations.

Although the concept of deficits might seem distant for many taxpayers, they highlight a fundamental reality: the government is spending beyond its tax revenue. This imbalance necessitates borrowing, which subsequently amplifies the national debt. Economists caution that continued borrowing leads to higher interest payments, thereby impacting fiscal health.

“We are currently on a perilous path,” Smetters warned. He emphasized that the escalating U.S. debt could instill anxiety in capital markets, questioning the federal government’s ability to raise taxes or enact spending cuts that would prevent a default on its obligations.

Moreover, Smetters contends that neither candidate is adequately addressing the broader issue of fiscal responsibility. He described the situation metaphorically, stating, “the house is burning down and the candidates are arguing over the furniture.” This sentiment underscores concerns that both proposals may exacerbate existing economic challenges rather than mitigate them.