Kamala Harris’s tax plan largely mirrors the broader Biden-Harris administration's approach, emphasizing increased taxes on corporations and high-income individuals. The plan aims to generate revenue to fund various social and economic programs. However, a recent economic analysis by the Tax Foundation, suggests that the proposed tax changes could have significant effects on the U.S. economy.

Key Provisions of the Harris Tax Plan

1. Increase in Individual Tax Rates:

The plan proposes raising the top marginal tax rate on individual incomes to 39.6% for single filers earning over $400,000 and married couples filing jointly earning over $450,000. This move would align with the pre-2017 tax reform levels.

2. Tax on Capital Gains and Unrealized Gains at Death:

One of the most notable provisions is the proposed increase in the capital gains tax rate to 28% for individuals earning over $1 million. Additionally, the plan introduces a tax on unrealized capital gains at death for estates valued over $5 million, effectively reducing the "step-up" in basis for inherited assets.

3. Limiting Like-Kind Exchanges (1031 Exchanges):

The plan seeks to limit the tax-deferral benefit of like-kind exchanges to $500,000 in gains, which may discourage real estate investors who rely on this provision to reinvest proceeds without immediate tax consequences.

4. Corporate Tax Increases:

The corporate tax rate would increase from 21% to 28%, reversing part of the reduction implemented in 2017. Additionally, the corporate book minimum tax rate would be raised from 15% to 21%, and the excise tax on stock buybacks would increase from 1% to 4%.

5. Expansion of the Net Investment Income Tax (NIIT):

The plan proposes expanding the NIIT base to include active pass-through business income and raising the NIIT rate from 3.8% to 5%. Additionally, it raises the additional Medicare tax from 0.9% to 2.1%.

6. Other Provisions:

Other significant measures include taxing carried interest as ordinary income, tightening estate tax rules, imposing new limits on large retirement account balances, and making the American Rescue Plan Act's Earned Income Tax Credit (EITC) expansion permanent.

Economic Impact: The Tax Foundation's Analysis

The Tax Foundation’s economic model provides a comprehensive assessment of the proposed tax changes' potential effects on the economy:

• Gross Domestic Product (GDP):

The overall economic output is projected to decrease by 2.0%. This decline is mainly driven by reduced capital formation due to higher taxes on corporate profits, capital gains, and estates.

• Gross National Product (GNP):

The GNP, which measures the value of goods and services produced by U.S. residents, is expected to fall by 1.8%. This reflects the reduced income accruing to U.S. residents as capital investment is discouraged.

• Capital Stock and Wages:

The analysis indicates a 3.0% reduction in capital stock, reflecting a lower incentive for investment. Wages are projected to decline by 1.2%, primarily due to decreased productivity and capital accumulation.

• Full-Time Equivalent Jobs:

The proposed tax changes are estimated to result in a loss of approximately 786,000 full-time equivalent jobs. The most significant job losses are attributed to the higher corporate tax rate, expanded NIIT, and increased taxes on capital gains and estates.

• Additional National Debt:

While the tax plan aims to increase federal revenue, the potential reduction in economic growth could offset some gains, potentially adding to the national debt if economic output shrinks and reduces the tax base.

Specific Provisions and Their Projected Impacts

1. Raising Individual Tax Rates:

Estimated to reduce GDP by 0.1% and result in a loss of 86,000 jobs.

2. Taxing Unrealized Capital Gains at Death:

Expected to reduce GDP by 0.2%, GNP by 0.4%, and cause a loss of 75,000 jobs.

3. Limiting 1031 Like-Kind Exchanges:

Minimal impact on GDP, but a loss of 2,000 jobs.

4. Expanding and Increasing NIIT:

Predicted to reduce GDP by 0.2% and result in 41,000 fewer jobs.

5. Raising Corporate Taxes:

The most significant impact, with a projected 0.6% decline in GDP and a loss of 125,000 jobs.

Conclusion

While Kamala Harris's tax plan aims to generate additional revenue to fund social programs and reduce inequality, the economic analysis suggests potential trade-offs, including slower economic growth, reduced capital investment, and significant job losses. As Harris’s plan is more big government, more taxes, and more spending it will harm our National Debt which will increase interest costs, and job losses due to negative economic growth.  We need a plan that stays within the limits of our constitution.  We need less government and more entrepreneurship; we need working people to keep their hard-earned money instead of turning it over to the federal government for more unconstitutional spending.