The past month will go down as one of the most dramatic four-week periods in American history.
This past Sunday, after several weeks of speculation, President Biden announced that he would step out of the 2024 presidential race. Shortly after the news broke, our Chair, Morris Pearl, released a statement on behalf of our organization, lauding Biden for his “unrivaled act of selfless patriotism.” You can read Morris’ statement in full HERE, or you can read an excerpt of it published by Fortune.
As of this writing, Vice President Kamala Harris has secured support from enough delegates to become the Democratic Party’s nominee for president at the Democratic National Convention next month. With Harris now at the top of the ticket, we’d like to use this week’s Closer Look to explore her record on taxes.
Before she became vice president, Harris served four years in the US Senate from 2017 to 2021. During her time on Capitol Hill, Harris sponsored 19 tax bills and co-sponsored an additional 143. One of her signature pieces of tax-related legislation was the LIFT (Livable Incomes for Families Today) the Middle Class Act. This legislation would have created a new refundable tax credit for low-income workers, worth up to $3,000 for single tax filers and $6,000 for married couples, in addition to the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC). In 2018, the Tax Policy Center estimated that the LIFT Act would have delivered most of its benefits to low-income workers: if it had passed, 30% of its benefits would have gone to the lowest fifth of earners while 33% would have gone to the second lowest quintile in 2019. And unlike the EITC or CTC, the bill would have given especially large benefits to young adults without children.
You may remember that Harris also ran for the 2020 Democratic presidential nomination. She ultimately withdrew her candidacy in December 2019 before the primaries, but the tax policies that she championed during her campaign give us a glimpse into what sorts of proposals she might support as a presidential candidate now. During her 2020 campaign, in addition to the tax credit that her LIFT Act would create, Harris supported a financial transactions tax on stocks, bonds, and derivatives; strengthening the estate tax; and taxing capital gains at the same rate as ordinary income. She also pushed to raise the corporate tax rate from 21% to 35%, i.e. what it was before the 2017 GOP Tax Cuts and Jobs Act (TCJA), which is actually higher than the 28% rate that Biden has proposed.
As vice president under the Biden administration, Harris also deserves some credit for the tax changes introduced by Democrats over the last three years. One such change was the expansion of the CTC that came with the American Rescue Plan Act of 2021. This Act temporarily increased the CTC from $2,000 to $3,000 (or $3,600 for children under the age of 6). The temporarily expanded CTC also involved advance monthly payments, was fully refundable, and did not have a cap on the total credit that a tax filer with multiple children could claim.
Incredibly, this expanded CTC managed to cut child poverty nearly in half and lifted no fewer than 3.7 million children out of poverty in 2021 alone. While the federal poverty line is incredibly antiquated, it’s indisputable that millions of children were significantly better off. Harris hasn’t shied away from touting this on the campaign trail: at a stop at a North Carolina high school last week, she said, “Pull up the split screen. Whereas the last administration gave tax cuts to billionaires, we gave tax cuts to families through the Child Tax Credit, which cut child poverty in America by half.” Ever since the expanded CTC expired in 2022 and child poverty predictably rebounded to pre-COVID levels, Democrats have been trying to put a version of it back on the books, and we would expect Harris as president to continue advocating for it.
The Inflation Reduction Act of 2022 (IRA) – Biden, Harris, and Democrats’ signature climate, healthcare, and tax reform package – also made some good and important changes to the tax code. Among other things, the IRA introduced a 15% minimum tax on corporations, increased funding for the IRS, and enacted a 1% excise tax on stock buybacks. The 15% corporate minimum tax helped ensure that big-box companies like FedEx and Nike can no longer get away with paying $0 in federal corporate taxes. The $80 billion that the IRA appropriated to the IRS has done wonders: among other things, it has helped the agency more effectively go after wealthy tax cheats, successfully launch an online Direct File program, and answer substantially more taxpayer phone calls and service requests. (Unfortunately, roughly $20 billion of that funding was clawed back in May 2023 during the debt ceiling negotiations, but the billions that remained have still managed to transform the agency for the better.) And while corporations are still spending out the wazoo on stock buybacks, it’s reassuring that at least some measure was taken with the 1% excise tax to discourage corporations from using this technique to artificially increase their shareholders’ wealth while doing nothing of real economic value.
It’s worth noting that, in Biden’s ideal political world, tax policy reform would have gone further than what we saw with the IRA. In his proposed budget for Fiscal Year 2025, Biden’s tax policy proposals included, among other things: introducing a 25% minimum tax on the full income, including the unrealized capital gains, of households with more than $100 million in wealth; increasing the corporate tax rate to 28%; closing the carried interest loophole; taxing capital gains above $1 million at the same rate as ordinary income; and increasing the top marginal income tax rate to 39.6%. While there is still plenty to learn about Vice President Harris’ position on a myriad of tax issues, we feel confident this is one area she will follow in President Biden’s footsteps.
We’ll probably get a better sense of Harris’ own tax policy vision in the coming days and weeks. But from what we’ve seen from her record as a senator, presidential candidate, and finally a vice president, we feel optimistic about what a Harris administration would pursue. Perhaps most critically, we can already see the stark contrast between her agenda and her opponent’s.
Harris is coming to the fore at a pivotal moment, as many of the provisions of the TCJA are scheduled to expire at the end of 2025. She will have to prosecute the case against the Trump tax cuts for the wealthy and corporations, which will be no small task. But if her history on tax is anything to go by, we have every reason to be optimistic.
