As the 2024 election approaches, the debate over tax policies is heating up, with voters seeking clarity on which candidate’s proposals will best serve their financial interests. A deep dive into the numbers reveals that Kamala Harris’s tax plans could offer significant advantages for middle-class Americans compared to those proposed by Donald Trump. However, not everything in Harris’s tax policy is as beneficial as it seems, particularly her controversial proposal to tax unrealized gains.
This is great stuff. pic.twitter.com/rd4x371kGA
— Scott Smith, MSW #BLM 🇺🇲🦅🇺🇦🏳️🌈🌈🟦🟧 (@Canaansdad1987) August 31, 2024
The Average American Family: A Case Study
To understand the impact of these tax plans, let’s consider a typical American family: one earning $75,000 per year with two children. According to the latest data from the U.S. Census Bureau, this income level reflects the median for many households.
Trump’s Tax Plan: Favoring the Wealthy
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Donald Trump’s tax strategy focuses on making his 2017 tax cuts permanent, which primarily benefits high-income earners. For our average family:
- Standard Deduction: $27,700
- Tax Bracket: 12%
- Child Tax Credit: $4,000 ($2,000 per child)
After deductions and credits, the effective tax rate for this family would be 2.23%, resulting in a tax bill of $1,676. While this approach maintains the status quo for middle-income earners, it does little to offer additional relief. Furthermore, Trump’s proposal to impose a 10% tariff on all imports and a 60% tariff on Chinese goods could add as much as $4,000 in additional annual costs for the average family, effectively negating any tax savings.
Harris’s Tax Plan: A Boost for the Middle Class
Kamala Harris’s tax proposal takes a more progressive approach by allowing Trump’s tax cuts to expire in 2025 and reintroducing a tax structure similar to the pre-2017 system. Harris also proposes a more generous child tax credit:
- Standard Deduction: Lower than Trump’s but offset by personal exemptions.
- Tax Bracket: Reverts to pre-2017 levels.
- Child Tax Credit: $6,000 ($3,000 per child)
For the same family, this results in an effective tax rate of 1.22%, with a total tax bill of $915. The enhanced child tax credit offers more direct support to families, making Harris’s plan more favorable for the middle class. As one analyst in a recent video pointed out, Harris’s plan is “better for you” as it provides more substantial benefits to the average American family.
Visual Comparison: Tax Impact by Income Bracket
Below is a visual comparison of the tax impact for different income brackets under Trump’s and Harris’s plans:
| Income Bracket | Trump Effective Tax Rate | Harris Effective Tax Rate |
|---|---|---|
| $50,000 | 1.8% | 0.9% |
| $75,000 | 2.23% | 1.22% |
| $100,000 | 5.5% | 3.1% |
| $250,000 | 12.0% | 15.0% |
| $1,000,000+ | 23.8% | 35.0% |
Note: These rates are estimates based on the proposed tax structures and may vary depending on specific deductions and credits.
The Dark Side of Harris’s Tax Plan: Unrealized Gains
While Harris’s plan appears more favorable for the middle class, her proposal to tax unrealized capital gains has raised concerns. Taxing unrealized gains means taxing the increase in value of assets like stocks and property, even if they haven’t been sold. This policy could be particularly harmful during market downturns, as individuals might owe taxes on gains that no longer exist due to market fluctuations. This could force many to sell assets prematurely to cover their tax liabilities, disrupting long-term investment strategies and potentially leading to broader economic instability.
Trump’s Policies: A Boon for the Wealthy
On the other hand, Trump’s tax cuts disproportionately benefit the wealthy. The 2017 Tax Cuts and Jobs Act (TCJA) slashed corporate tax rates and provided significant benefits to high-income earners, particularly through reductions in estate taxes and lower top marginal rates. While middle-class families saw some tax relief, the wealthiest Americans reaped the most substantial benefits. Trump’s continued emphasis on extending these cuts further cements his tax policy as one that primarily advantages the rich.
Who Really Benefits?
When comparing the tax plans of Kamala Harris and Donald Trump, it’s clear that Harris’s proposals are structured to provide more direct benefits to middle- and lower-income families. As noted in a recent analysis, “Harris’s plans not only are better for you just from a straight taxation perspective if you’re an average American, but they’re also better when you factor in all the other elements of how their two policy structures are going to affect your bottom line as a household.”
However, voters should be cautious of Harris’s plan to tax unrealized gains, which could have unintended negative consequences. Conversely, Trump’s tax policies, while offering short-term benefits to the middle class, are primarily designed to favor the wealthy, leaving the average American with little long-term relief.
Sources:
- U.S. Census Bureau
- IRS Tax Tables
Featured image via Screengrab
