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Whichever candidate prevails this November will immediately become the loudest voice in a fierce tax debate set to consume Washington in 2025.
Policymakers will have to decide what to do about cuts signed into law in 2017 that expire at the end of the first year of the next president’s term.
There is one area of significant agreement within the sprawling debate between Vice President Kamala Harris and former President Donald Trump: They both think taxpayers who make under $400,000 a year should see their tax cuts extended.
But that’s about it. The two nominees disagree on how to pay the tab, and both want to push other far-reaching — not to mention expensive — priorities into any final bill.
What Trump is promising is a complete extension of the cuts for individuals of all income levels, included in his 2017 Tax Cuts and Jobs Act, alongside a dizzying array of additional promises from no taxes on tips and overtime to lowering taxes for big business.
Harris, meanwhile, has signaled a different tax approach — only pushing to extend cuts for those making less than $400,000 a year alongside a new expansion of things like the child tax credit and the earned income tax credit.
But it’s still a hefty price tag, likely above $4 trillion, with the vice president laying out tax increases elsewhere to try and balance out the costs.
“The composition of Congress is critical,” said Charles Myers, the chairman and founder of Signum Global Advisors and former adviser to figures like Hillary Clinton and Joe Biden.
He noted that a scenario in which either president faces at least one chamber of Congress controlled by the opposition, which he sees as the most likely scenario, will quickly force a massive lowering of expectations.
“As long as we have divided Congress,” he said in a recent interview “literally almost every tax proposal, whether it’s Trump promising to cut taxes for everyone [to] Harris’s corporate tax cap gain tax, taxing unrealized cap gains, none of that happens.”
The federal corporate tax rate of 21% is also set to be central in the coming debate. Trump is pushing for a lower rate of 15%. Harris supports pushing it up to 28%.
The debate will also have a big effect on the $35 trillion national debt. The question is perhaps about how much different approaches would add to it rather than any realistic chances of debt reduction.
According to the CRFB, Trump’s full agenda could result in anywhere from $1.65 trillion to $15.55 trillion in new red ink over the next decade. Harris, meanwhile, could add somewhere between $0.3 trillion to $8.3 trillion with her promises.
Tax cuts are an absolutely central issue for Trump.
The 2017 law was Trump’s signature legislative accomplishment in office, with additional cuts being an issue that he nonstop talks about in public and private settings.
“In all of my years, I have never seen anybody running for office saying we will raise your taxes,” Trump told a recent crowd in North Carolina of Harris.
He has also made taxes central to his closing argument, offering at least 11 new cut promises in the final weeks of the campaign in addition to extending that 2017 bill.
He has even flirted with ideas that would reshape the tax code entirely, repeatedly expressing support for eliminating income taxes.
In a recent podcast appearance with Joe Rogan, Trump doubled down on an idea he has toyed with in recent months to eliminate income taxes entirely because, in his view, tariffs will bring in so much.
A sign for former President and Republican presidential candidate Donald Trump promotes a campaign rally at Madison Square Garden on Oct. 27. (ANGELA WEISS/AFP via Getty Images) ·ANGELA WEISS via Getty Images
“Did you just float out the idea of getting rid of income taxes and replacing it with tariffs? Are we serious about that?” the podcast host asked Trump at one point.
“Yeah, sure,” Trump responded. “Why not?”
It’s part of a fascination Trump has expressed for the 1890s and the era of William McKinley — one of the last times in US history, and before income taxes were instituted, when tariffs were at the center of government policy and the US budget.
Economists said Trump’s 2024 math doesn’t add up, with tariffs currently contributing less than 2% of federal revenue.
It’s a plan Congress would also have to sign on for and is seen as unlikely to gain traction outside of the right side of the Republican caucus on Capitol Hill. As it stands, many Republicans have been wary of even Trump’s less disruptive tax proposals with concerns about how they could explode the budget deficit.
But potentially on the table if Republicans sweep are Trump’s promises ranging from eliminating taxes on tips, overtime, and Social Security benefits to new tax incentives for homebuyers to even a reversal of taxes he instituted when he was in office.
In one notable shift, Trump is now pledging to reverse the $10,000 cap on state and local tax (SALT) deductions that he himself signed into law.
And he could have bipartisan support for at least some of his plans if he is in the Oval Office next year negotiating with lawmakers.
At a recent appearance in New York at the Al Smith Memorial Foundation Dinner, Trump was greeted for nearly his entire remarks by a scowling Sen. Chuck Schumer, who leads Democrats in the upper chamber and will be at the table for any 2025 negotiations.
The only exception that night? When Trump reiterated his SALT pledge. Schumer offered tepid applause for that one.
“We’re going to get that thing going, Chuck,” Trump said.
As for Harris, the question about her approach to any tax debate in 2025 will be what other provisions she might want to include.
She has run focused on tax ideas in her “Opportunity Economy” agenda that are not directly related to expiring tax provisions but a potential Harris administration is sure to try to include them in any omnibus tax deal.
Charles Myers said that in a divided government scenario, there is a chance something like the child tax credit could be included, noting it has bipartisan backing. But he said it will still be an uphill climb given the challenge of fitting that complicated provision into what will be a crowded agenda that could be made more challenging by government gridlock.
“I just worry it might be a victim of the fact that it’s going to be negotiated around the same time as the debt ceiling and the budget,” he noted.
Vice President and Democratic presidential nominee Kamala Harris waves as she arrives for a campaign event in Clarkston, Ga., on Oct. 24. (CHRISTIAN MONTERROSA/AFP via Getty Images) ·CHRISTIAN MONTERROSA via Getty Images
Harris would continue many of Joe Biden’s approaches to taxes, but the issue has also proven to be an opportunity to draw some distinctions with the current president.
“What we will do together … is about investing in working people, in middle-class people, in our children,” she told a recent rally crowd in Detroit.
Harris recently announced a change in her plan to pay for her agenda by endorsing a long-term capital gains rate for the ultra-rich of 28%. That’s about 10 percentage points lower than what Biden has proposed and would apply to Americans making over $1 million a year.
Harris has also signaled her support for a Biden plan to tax unrealized capital gains on holdings not yet sold.
It’s a plan that would also only apply to America’s richest households (even many of the literal 1% wouldn’t be impacted) but has nonetheless seen fierce business-world pushback.
But Harris is downplaying that for the moment, and prominent supporter Mark Cuban claimed in a recent Yahoo Finance appearance that the idea “isn’t being discussed at all.”
Ben Werschkul is Washington correspondent for Yahoo Finance.
Every Friday, Yahoo Finance’s Rachelle Akuffo, Rick Newman, and Ben Werschkul bring you a unique look at how US policy and government affect your bottom line on Capitol Gains. Watch or listen to Capitol Gains on Apple Podcasts, Spotify, or wherever you find your favorite podcasts.
