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Let us take a look at what the Wharton School at Penn, the college Donald Trump graduated from, had to say about the Harris and Trump plans.
Harris Campaign Proposals
The Harris campaign proposals would reduce taxes on low- and middle-income households by expanding the Child Tax Credit (CTC), expanding the Earned Income Tax Credit (EITC), increasing premium subsidies for health insurance under the Affordable Care Act (ACA), and providing down payment assistance to qualified first-time homebuyers. It would also increase corporate taxes to partially offset the costs of those proposals. More specifically:
- Expanding the Child Tax Credit. Under current law, eligible families receive a tax credit of up to $2,000 per child, a portion of which is refundable ($1,700 in 2024). Starting in 2026, the total credit amount will decrease to $1,000. Under the Harris campaign policy proposal, starting in 2025 the credit amount would instead permanently increase to $3,600 per child 5 years and younger, and to $3,000 per child older than 5 years. The proposal would also increase the maximum age of eligible children from 16 to 17 and make the credit fully refundable. These proposed permanent changes generally correspond to the temporary CTC provisions enacted under the American Rescue Plan Act (ARPA). Furthermore, families with newborns would receive an additional $2,400 fully refundable credit during the first year of the child’s life, bringing the total maximum credit value to $6000 for newborn children.
- Expanding the Earned Income Tax Credit. Under current law, in 2024, the earned income tax credit for childless workers has a much less generous maximum credit value and phasing structure than the EITC for workers with children. The policy proposal from the Harris campaign would adjust the credit structure to be more generous to workers without children, generally in line with the temporary EITC expansion under the ARPA, on a permanent basis. In addition to the adjusted maximum credit and phasing structure, the proposal would also set the eligible age range to 19 and above, whereas the current law age range is 25-64.
- Permanently extend enhanced premium tax credits. This proposal would extend the lower contribution percentages of household income used for determining the premium tax credit under the ACA, as previously enacted in the ARPA and extended by the Inflation Reduction Act (IRA).Those parameters are set to expire, rendering the subsidies less generous after 2025; this policy would instead make them permanent.
- Providing down payment support for qualified first-time homebuyers. This proposal would provide an average of $25,000 in assistance to qualified first-time homebuyers. The benefit would be available for four years. Although the Harris campaign included few details, it cites a closely related Biden-Harris administration proposal from earlier this year. We assume that details not provided would broadly follow the prior proposal.
- Raise the corporate income tax rate to 28 percent. Under current law, corporations pay a statutory tax rate of 21 percent on their taxable income. This proposal would raise that rate to 28 percent. That would reverse one half of the statutory corporate tax rate reduction enacted as part of the 2017 Tax Cuts and Jobs Act, which lowered the rate from 35 percent to 21 percent.
Budgetary Effects: Conventional Estimate
PWBM projects that the Harris campaign proposals would increase primary deficits by $1.2 trillion on net over the 10-year budget window from 2025 to 2034.25
Summary: We estimate that
the Harris Campaign tax and spending proposals would increase primary deficits by $1.2 trillion over the next 10 years on a conventional basis and by $2.0 trillion on a dynamic basis that includes a reduction in economic activity.
Lower and middle-income households generally benefit from increased transfers and credits on a conventional basis, while higher-income households are worse off.26
Trump Campaign Proposals
The Trump Campaign proposes to permanently extend major components of the 2017 TCJA, including provisions that will expire after 2025 under current law as well as provisions that have already ended or are phasing out. The Trump campaign would then provide additional tax cuts for corporations and for elderly households receiving Social Security benefits. More specifically:
- Extend the individual income tax provisions of TCJA. For individuals, extending the TCJA would keep seven ordinary tax brackets with TCJA thresholds and rates. The top rate would be kept at 37 percent (versus 39.6% pre TCJA) and the exemption and exemption phaseout threshold from the Alternative Minimum Tax (AMT) would remain elevated. The standard deduction would remain roughly twice as high as before the TCJA and personal exemptions would remain eliminated. For households who itemize deductions, the cap on the Mortgage Interest Deduction would remain at $750,000 in mortgage debt and up to $10,000 of State and Local taxes could be deducted. The Child Tax Credit would remain at $2,000, the amount refundable at $1,400 (in 2017 dollars) and begin to phase out at $400,000 of income. The Other Dependent Credit, which provides a $500 nonrefundable credit for dependents that do not qualify for the CTC, would remain in effect. Married filers would be able to deduct 20 percent of the first $315,000 ($157,500 for other filers, all in 2017 dollars) in income from pass-through businesses, subject to limitations. Estate tax exemptions would remain at their higher post TCJA levels. See our recent extensive analysis of the TCJA extension for additional information.
- Eliminate taxes on Social Security benefits. Under current law, individuals drawing social security benefits are required to pay taxes on 50-85% of their benefits, with lower-income retirees paying taxes on a lower share than higher-income retirees. This proposal would exclude all Social Security benefits from taxable income for all individuals.
- Extend the business tax provisions of TCJA. Lawmakers made several changes to the tax treatment of business investment in the 2017 TCJA, creating a tax system that was more generous to businesses in the years immediately following the law’s enactment but became less generous over time. Initially, businesses could immediately deduct from their taxable income 100 percent of most tangible investment costs – known as “bonus” depreciation – and 100 percent of expenditures for research and experimentation (R&E). This change was partly offset by a new limitation on deductions for interest expenses. In the years since, the bonus depreciation percentage has dropped 20 percentage points per year (falling to zero in 2027). Moreover, since 2022, businesses have been required to deduct R&E costs spread over five years instead of taking the deduction in a single year. Beginning in 2023, the limitation on interest deductions became more restrictive. The Trump campaign proposal would undo these changes, restoring and making permanent the regime that existed immediately after TCJA’s enactment. See PWBM’s recent extensive analysis of the TCJA extension for additional information.
- Lower the corporate income tax rate to 15 percent. The 2017 TCJA permanently reduced the corporate tax rate from a statutory tax rate of 35 percent of taxable income to 21 percent. This proposal would lower that rate to 15 percent.27
- Budgetary Effects: Conventional Estimates
- PWBM projects that the Trump campaign proposals would increase primary deficits by $5.8 trillion on net over the 10-year budget window from 2025 to 2034 on a conventional basis.
- Permanently extending the expiring individual income tax provisions of TCJA would add $3.4 trillion to deficits (before interest costs) over the next ten years. Restoring the original TCJA regime for taxing business investment adds another $623 billion to increase the total cost of TCJA extension to more than $4 trillion.
- The additional cost of eliminating taxes on Social Security benefits is $1.2 trillion over 10 years. The additional cost of lowering the corporate tax rate to 15 percent is $595 billion over 10 years. Both estimated costs are lower under the TCJA extensions discussed above due to various interactions. Specifically, ending the taxation of Social Security benefits is lower after TCJA extension than relative to current law because the TCJA extension already reduces the tax rate on those benefits for some households. Similarly, the cost of reducing the corporate tax rate is lower because extending TCJA’s business investment provisions already reduces corporations’ taxable income, which means that each percentage point of corporate income tax raises less revenue..28
- Summary: We estimate that the Trump Campaign tax and spending proposals would increase primary deficits by $5.8 trillion over the next 10 years on a conventional basis and by $4.1 trillion on a dynamic basis that includes economic feedback effects. Households across all income groups benefit on a conventional basis.29
The Wharton School of Business which Donald Trump attended, shows that his plan would increase the deficit nearly 5 times more than the Harris plan would on a conventional basis and just a bit more than double on a dynamic basis.
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