President Biden withdrew from his campaign for reelection, and Democrats have chosen Vice President Harris to replace him. She tapped Minnesota Gov. Tim Walz as the ticket’s vice-presidential candidate. The GOP candidate is former President Donald Trump. His running mate is Ohio Sen. J.D. Vance. Both tickets’ policy positions are still evolving, but a fair amount is already known about their stances on taxes, health care (insurance) and other issues of key concern to NAIFA members.
Trump/Vance: The Trump/Vance economic (tax) agenda includes support for extending current law—the expiring provisions of the 2017 tax bill. Trump has also floated novel ideas like replacing income taxes with tariffs, both as a revenue measure and as a way to better position the U.S. economy relative to other countries. He also supports cutting the corporate income tax rate from 21 percent to as low as 15 percent, but at least to 20 percent.
There are also two new (or at least not part of the expiring 2017 tax law) tax proposals suggested by Trump: elimination of tax liability on income from tips and making all Social Security payments income-tax free. Putting aside the policy implications, both of these provisions would have a substantial adverse revenue impact—i.e., depending on how any such rules are structured, each could cost trillions and, in the case of the Social Security proposal, would adversely affect the ailing Social Security Trust Fund. Vice President Harris has also endorsed tax-free tips limited to hospitality industry workers and possibly income-limited, in conjunction with an increase in the minimum wage.
Currently, income from tips is taxable under usual income tax rules. Social Security benefits are not taxed to the extent beneficiaries have incomes of $24,000/single or $32,000/married. Up to 50 percent of Social Security benefits are taxed for individuals with incomes between $25,000 and $35,000 ($32,000 to $44,000 married). For those with incomes above $34,000/individual ($44,000 married), 85 percent of Social Security benefits are taxed.
Harris/Walz: The Harris/Walz economic policy positions are still being fleshed out, but it is known that Vice President Harris supports the Biden economic agenda. That includes a vow to not raise taxes on those who earn less than $400,000/year, and a proposal to hike the corporate income tax rate to 28 percent. She may adopt other Biden proposals, too, including new rules to annually tax very wealthy individuals’ unrealized gains in investments in certain circumstances. Also proposed by the Biden Administration and possibly among the proposals Harris will support are changes to trust rules, especially in estate planning contexts, and limitations on qualification for tax benefits based on income. As noted above, Harris has also endorsed eliminating tax on tips.
Other Harris-Walz policy proposals are (or are likely to include) a call for an increase in the federal minimum wage (referenced above), and a federal paid (family and sick) leave program. In the past, Harris has championed single-pay health insurance proposals, but now has backed off support for single-pay health insurance.
Prospects: Of course, for any of these new proposals to be in play for real, their proponents have to win the November election. Chances for fuller extension of expiring 2017 tax law provisions, including the section 199A deduction for qualifying noncorporate business income, are high if the GOP wins, and not impossible, but lower if Democrats win.
For the tariff and/or Social Security proposals to be in play, Republicans have to win the House, Senate, and Presidency. Congressional Republicans (plus some Democrats in addition to Vice President Harris) are interested in the tax-free tip income proposal, depending on how it is structured. (President Biden through a spokesperson has indicated he would sign a tax-free tip proposal should it reach his desk this year.) There is less interest currently in the Social Security and tariff ideas. Note that proposals affecting Social Security cannot be done through the fast-track reconciliation procedure.
If Democrats win, expect debate and possible enactment of at least some “tax the rich” proposals (most likely, proposals to limit eligibility for tax benefits based on income). Also, expect an effort to raise the corporate tax rate and to at least modify (shrink), if not repeal the section 199A deduction for qualifying noncorporate business income. “Closing loopholes” will also come into play under a Democratic president and/or Democratic control of the House and/or Senate.
There is some bipartisan interest in both the paid leave and federal minimum wage proposals, but whether either can be enacted will depend on how the proposals are structured and the revenue impact they are projected to have.
And still unclear is the degree to which either party will tackle deficit reduction. Lawmakers in both parties are concerned about spiraling federal debt/deficits, but their approaches to dealing with these concerns differ. As a general rule, Republicans favor spending cuts over tax increases, while Democrats tout rules that result in “the rich” and big corporations paying “their fair share” in taxes.
NAIFA Staff Contacts: Diane Boyle – Senior Vice President – Government Relations, at dboyle@naifa.org; or Jayne Fitzgerald – Director – Government Relations, at jfitzgerald@naifa.org; or Michael Hedge – Senior Director – Government Relations, at mhedge@naifa.org.