As the 2024 presidential campaign heats up, Vice President Kamala Harris and former President Trump are laying out competing economic visions for the country.
The presidential candidates are battling over a number of tax issues, including expanding the child tax credit and repealing the tip tax.
A new study by the Penn Wharton Budget Model, a nonpartisan group at the Wharton School of the University of Pennsylvania, says both candidates' spending plans could ultimately increase an already-large national deficit and put a strain on U.S. economic growth.
“Obviously, it's going to have a negative impact on the economy,” Kent Smetters, a professor at the Wharton School of the University of Pennsylvania and director of the Penn Wharton Budget Model, told Fox Business. “That doesn't mean it's a bad policy. It's just that it's a trade-off.”
Kamala Harris
Harris' plan would increase the deficit by about $1.2 trillion over the next decade and reduce GDP, the broadest measure of goods and services produced domestically, by about 1.3%.
By 2054, the tax and spending plan would reduce economic growth by about 3 percentage points, according to the proposal.
AP
“We're in a very dire financial situation right now,” Smetters said. “Neither candidate has shown a great understanding of that. Neither of them wants to talk about spending.”
Harris, the Democratic candidate, has proposed giving parents of newborns a $6,000 tax credit, with families receiving the payment during the first year of a child's life.
She also proposes restoring the pandemic-era child tax credit.
The boost approved by President Biden provides $3,000 per year for each child age 6 to 17 and $3,600 per year for each child under age 6 in 2021. Individuals earning less than $75,000 a year and couples earning less than $150,000 combined are eligible for the boost.
Harris has called for raising the corporate tax rate from 21% to 28% to pay for her proposal.
Donald Trump
As proposed, President Trump's spending plan could increase the national deficit by $4.1 trillion over the next decade — a move that would initially boost the nation's GDP, but ultimately act as a drag on economic growth.
Alison Dinner/EPA-EFE/Shutterstock
The plan would result in a 0.4% decline in GDP by 2034 and a 2.1% decline by 2054.
President Trump supports several tax-related policies, including making the entire Tax Cuts and Jobs Act permanent if he is re-elected in November.
The law, enacted by Republican lawmakers and President Trump in 2017, made sweeping changes to the nation's tax code, including lowering the top individual income tax rate from 39.6% to 37% and nearly doubling the standard deduction.
However, these changes to the personal section of the tax code are set to expire in 2025, and many taxpayers, including those making less than $400,000, would face stiffer taxes if the law is not extended.
If Congress doesn't act, more than $3.4 trillion in personal income and estate tax cuts are set to expire next year.
Additionally, Trump has promised to eliminate the tip tax on service workers and cut taxes on Social Security payments to seniors.
