Though much has been said about Vice President Kamala Harris’ – and incumbent Joe Biden’s – plans to significantly increase taxes should she be elected in November, her economic plans also boast some hefty credits and reductions.
Indeed, though ambitious, the VP’s economic plan is intended to be progressive, meaning the bulk of the burden would fall on the shoulders of the wealthy. The aim is that those making less than $400,000 annually would not see their costs rise and may even see some cuts.
How could Harris reduce the burden on the middle class?
One way this will likely be attempted is by extending parts of Trump’s Tax Cuts and Jobs Act (TCJA), as, should it be allowed to expire in full, an estimated 60% of Americans would see their taxes rise. While Harris did not directly engage with the idea by press time, Biden’s economic advisor, Lael Brainard, did come out in support.
Given Harris’ general tendency to pursue a continuation of the incumbent’s economic plan, it is likely she would also endorse a partial extension of TCJA.
The VP has also made her intention to generously expand child tax credits – possibly up to $3,600 per eligible dependent and $6,000 per newborn – known, and her previous comments hint that there may be some support for a significant expansion of Medicare later down the track.
The Democratic presidential candidate has, in addition to the aforementioned measure, also proposed a $25,000 subsidy to first-time home buyers, and she, much like Trump, supports the removal of taxes on tips for service workers.
Why retail investors might benefit from the Harris plan
It goes without saying that the average American would likely have significantly more disposable income between the planned tax reductions and removals, tax credits, and other measures.
For example, the child tax credit could help parent’s lower their credit card bills – and, by extension, interest rate payments – and the home-buying subsidy could save millions in rent that no longer needs to be paid as well as significantly reduce the size of home loans.
Reducing the tax burden on middle and lower-income households could, in the short term, reduce their costs and debt taking – and even help some save more money – and in the long term save millions in interest payments, belated trips to the doctor, and much more.
By extension, retail investors from such households would have significantly more money available both in the short and in the long-term to invest in the stock market, exchange-traded funds (ETFs), cryptocurrencies, high-interest savings accounts, or any other of the numerous investment vehicles.
For example, even if parents can save a mere $1,000 annually from the child tax credit to create a nest egg, it could, in 18 years, turn into a starting capital of nearly $30,000 if placed into a broad S&P 500 index fund.
Furthermore, this particular element of the Harris economic plan would also help further one of the approach’s main goals: reducing financial inequality in the country.
Reports from early 2024 indicate that, for the first time ever, the wealthiest 10% of Americans controlled 93% of the stock market.
Despite the likely positives, the Harris plan does have some drawbacks and no shortage of obstacles to overcome.
Why the Kamala Harris tax plan still has major issues
It would probably be exceptionally difficult to actually pass given that it includes multiple sweeping reforms, including those powerful entities and individuals within the country – such as a higher corporate tax rate, a higher upper tax bound, and taxes on unrealized gains for the exceptionally wealthy – would vehemently oppose.
If passed, it could also trigger some adverse effects for the hopeful retail investors. Corporations might seek to offload their new costs to consumers and workers, reducing wages, hiking prices, and starting mass layoffs.
The tax plan could also shift market trends as the proportion of wealthy investors trading shares could drop, and the higher costs for companies could lessen the impact of the controversial practice of stock buybacks, which themselves tend to have a significant impact on share prices.
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