Kamala Harris Tax Proposal | What Every Home Owner Needs to Know

Kamala Harris’s economic plan includes $5 trillion in new taxes, which could impact small businesses, investments, and unrealized gains. Find out what this means for your finances and the U.S. economy.

Kamala Harris has introduced a new economic plan that aims to reshape the U.S. tax system. This plan involves higher taxes on small businesses, capital gains, and even unrealized investments. While these changes are meant to increase government revenue, they have sparked concerns about their broader impact. This article breaks down Harris’s plan, explores its potential effects, and discusses what it could mean for your wallet.

$5 Trillion in New Taxes: What’s Included?

Harris’s plan proposes $5 trillion in new taxes, targeting various income sources. This includes:

• Raising the tax rate on small businesses to 39.6%
• Increasing taxes on capital gains and dividends to 44.6%, the highest in U.S. history

These changes are intended to generate significant revenue but could place a heavy burden on small businesses and investors. Critics argue that this could slow down economic growth and hurt job creation.

Impact on Small Businesses

Small businesses are crucial to the U.S. economy. They create jobs and drive innovation. However, Harris’s plan to increase the tax rate on small businesses to nearly 40% could make it harder for them to grow and hire. Higher taxes could lead to reduced profits, less investment in new opportunities, and slower business growth.

Corporate Tax Hike: Less Competitive Globally

Another major part of Harris’s plan is increasing the corporate tax rate from 21% to 28%. This would reverse the tax cuts from the Trump administration, which aimed to make the U.S. more attractive for businesses. A higher corporate tax rate could make the U.S. less competitive compared to other countries.

Global Comparison

With a 28% corporate tax rate, the U.S. would be higher than China, Canada, and the UK. This could push companies to move their operations abroad, resulting in fewer jobs and less investment in the U.S. Some sectors could face double the tax rates compared to China, making it difficult for U.S. companies to compete internationally.

Who Really Pays?

Although corporate taxes are aimed at businesses, they often affect employees and consumers too. Studies show that workers end up paying around 70% of corporate taxes through lower wages. The rest of the tax burden falls on shareholders through reduced returns and on consumers through higher prices. So, while the goal is to tax big corporations, the impact spreads much wider.

The Second Death Tax: A Double Hit

Harris’s plan also includes a proposal to add a second death tax, known as the step-up basis. This would treat death as a taxable event, with inherited assets taxed as if they were sold at current value. Rates could be as high as 44.6%, in addition to existing estate taxes.

How This Affects Families

For many families, passing down a business or farm is about preserving a legacy. However, this second death tax could force them to sell parts of their inheritance just to pay the taxes. While the policy is meant to target the wealthy, it could end up hitting middle-class families the hardest, making it difficult to keep family-owned businesses running.

Unrealized Gains: Taxing What You Haven’t Sold

Harris’s plan also proposes a tax on unrealized gains. This means taxing the increase in value of assets each year, even if they haven’t been sold. Imagine getting a tax bill every year as if you sold your stocks or property, even if you haven’t actually made any money from them.

Potential Risks

While this tax is aimed at the rich, there’s a risk it could eventually affect everyday investors. Tax policies that start with the wealthy often expand to include more people over time. For example, the income tax began by only targeting the top 1% with a 7% rate. Today, it affects almost everyone, with much higher rates. There’s concern that the same could happen with taxes on unrealized gains.

Lessons from Europe: Why Wealth Taxes Often Fail

Wealth taxes similar to those in Harris’s plan have been tried in Europe, but they often fail. Countries like Norway expected to collect significant revenue from wealth taxes, but instead saw capital leave the country. Norway, for instance, expected to collect $150 million per year but lost $54 billion, as wealthy individuals moved their money elsewhere.

Why Wealth Taxes Fail

Wealthy individuals and companies often have the resources to move their assets to lower-tax countries, leaving small businesses and less mobile assets to shoulder the tax burden. This can lead to reduced investment, fewer jobs, and a weaker economy. The European experience suggests that wealth taxes can drive away capital, reducing the intended revenue.

What’s Next? Potential Impacts of Harris’s Plan

Harris’s plan is still in the proposal stage, but it’s already generating significant debate. Critics from both parties worry that her approach might go too far. As the election nears, some details may change, but the overall direction points to higher taxes and more government spending.

Long-Term Effects

If implemented, these policies could lead to higher prices, slower economic growth, and increased costs for consumers. Businesses might hold back on hiring and investment, while individuals could see higher taxes on their savings and investments. Families trying to pass on their businesses could face hefty tax bills, forcing tough decisions about their future.

Conclusion: Finding the Right Balance

Harris’s economic plan prioritizes raising government revenue through higher taxes. While the goal is to reduce inequality and fund public initiatives, the potential downsides are significant. From small businesses to family-owned farms, the impact could be widespread, affecting many Americans.

Staying informed about these changes is crucial. Tax policy requires a careful balance between generating revenue and supporting economic growth. Finding the right mix will be key to ensuring the U.S. economy remains strong and inclusive for everyone.