Vice President Kamala Harris is proposing a $50,000 tax break for new small businesses, a campaign official said, as the Democratic presidential nominee seeks to clarify her economic policy vision ahead of next week’s debate with former President Donald Trump.
The new tax plan, part of a broader push for entrepreneurship, would massively expand the current $5,000 deduction for start-ups, said the official, who shared the plan with reporters on condition of anonymity because it had not yet been made public. . Harris sees the move as a way to contrast economic policy with Trump, who has called for lower corporate tax rates and lower rates for high-income earners, along with other policies aimed at undercutting middle-class taxpayers.
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The proposal is expected to be announced before Harris’ campaign speech on Wednesday in New Hampshire. Harris campaign advisers have also discussed plans to strengthen the safety net, such as child care or paid vacation extensions, among other things, along with tax proposals, though it’s unclear whether those or other policies will be included in Wednesday’s announcement, two other people said. a person familiar with the matter said. The people spoke on condition of anonymity to describe details that have not yet been released.
The plans will help put Harris’ economic policy vision front and center as his team tries to assemble a presidential campaign at breakneck speed after President Joe Biden dropped out of the race. Harris has so far largely called for maintaining the general direction of Biden’s policies, which have adopted a more aggressive role for federal intervention in the economy than his recent Democratic predecessors have supported. His first economic policy proposals released last month struck a populist tone, calling for big subsidies for new homes, a $6,000 child benefit for newborns and the first federal ban on price gouging in the grocery and food sectors.
The new focus on small businesses and entrepreneurs is likely intended in part to appease voters who believe Harris is too liberal. In addition to the $50,000 tax deduction, Harris proposes creating a new standard deduction for small businesses to speed up tax filings, lowering barriers to professional licensing and passing incentives to make it easier for state and local governments to set up. other changes, a campaign official said.
While support for small businesses and start-ups is good, policymakers have long struggled with how to adopt policies to boost their growth. In addition to the cash grants granted to new companies, the effect of tax deductions is often only limited, because companies usually only have a limited tax liability in their early years. Conservatives are also likely to see targeted measures as threatening big business. Harris’ plan would also allow new businesses to wait to claim the deduction until they first earn a profit.
The plan did not come with an estimated price tag. Nonpartisan budget analysts estimate Harris’ initial economic plans will cost about $1.7 trillion over 10 years.
“Small business and entrepreneurship are politically attractive, so it makes sense for Harris to lean on that as part of his opportunity economy pitch,” said Tobin Marcus, director of U.S. politics and policy at Wolfe Research and a Biden economic policy staffer. The Obama administration. “But in practice, targeted federal policy to help small businesses tends to be pretty small.”
A spokesperson for the Harris campaign declined to comment on the upcoming package, the exact contents of which are unknown. The Harris campaign also released an ad on Tuesday, the fourth of which focused on the economy, attacking Trump for pushing for corporate tax cuts.
About 62 million US workers are employed by a “small business,” typically defined as having 500 or fewer employees. The White House has touted a record number of new business applications in the first three years of the Biden administration, and black and Latino business ownership has grown at the fastest rate in more than a decade. The administration has taken credit for this small business boom, although the increase in remote work during and after the pandemic was probably key. According to Harris’ campaign, his small business proposals aim to generate 25 million new business filings in his first term, after the record 19 million so far under the Biden administration.
“The United States is in the midst of an unprecedented small business and start-up boom that no one saw coming,” said John Lettieri, president and CEO of the Economic Innovation Group, a nonpartisan political organization. “No policymaker has received valuable harnessing and continues to do so.”
Lettieri added that making the start-up deduction more generous is unlikely to significantly increase the number of start-ups because federal tax liability is not a key factor in starting a new business.
According to a Congressional Research Service report, the current reduction costs about $200 million a year.
Republicans have attacked the Biden administration’s record on business, arguing that its regulation through various federal agencies has stifled innovation and growth. Trump’s 2017 tax cuts cut the corporate tax rate from 35 percent to 21 percent, while lowering individual tax rates and doubling the standard deduction most taxpayers pay. Trump has talked about lowering the corporate tax rate to 15 percent again. The 2017 law also created a 20 percent deduction for so-called S corporations — including many small businesses — that pass their business income to individuals, which is set to expire in 2025.
“If the American people want more money in their pockets, the only option is to vote for President Trump,” the Trump campaign said in a statement Sunday.
It’s unclear whether the upcoming policy announcement reflects Harris’ overall view of the country’s tax code. The Harris campaign has previously told reporters it supports the roughly $5 trillion tax plans outlined in the White House budget. Some outside campaign advisers have called for Harris to include versions of Biden’s previously endorsed billionaire tax and higher corporate tax.
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