Main Street Alliance Executive Director Richard Trent reacts to the ‘bold’ proposal for small business startups, Vice President Kamala Harris’ plan to let the Trump tax cuts expire if elected and the impact of minimum wage requirements.
Vice President Kamala Harris is proposing to increase the standard tax deduction for small business startup costs tenfold as part of her broader economic agenda if she wins the White House this November, and economists are running the numbers on how much of an impact the plan might have on the U.S. economy.
The plan involves increasing the standard tax deduction for small business startup costs from the current level of $5,000 to $50,000, which Harris touted in a recent speech as “essentially a tax cut for starting a small business.”
Vice President Kamala Harris speaks during an NCAA championship teams celebration on the South Lawn of the White House on July 22, 2024 in Washington, DC. (Andrew Harnik/Getty Images / Getty Images)
On the surface, the proposal seems sound. A recent analysis by the Tax Foundation estimates the change would only reduce revenue by about $24.5 billion over the next decade and could spur some growth.
“The economic impacts are uncertain but small given the revenue impact,” the analysts wrote, adding, “to the extent the policy allows more businesses to recover costs, it will boost business investment and potentially economic dynamism.”
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The problem is, Harris’ other proposals included in her “Opportunity Agenda” are expected to drown out any potential growth that might come from the small business tax deduction boost.
“On its own, the proposal would likely have a very small but positive effect on the economy overall,” Erica York, senior economist at the Tax Foundation, told FOX Business. “Unfortunately, it’s proposed in the context of a plan to impose significantly higher marginal tax rate on saving and investment, which would swamp any small improvements to the startup deduction.”
O’Leary Ventures Chairman Kevin O’Leary discusses Kamala Harris’ proposed tax policies on ‘The Big Money Show.’
The Tax Foundation’s report found that Harris’s agenda as a whole, which includes raising top tax rates to among the highest in the developed world, would do more economic harm than good.
Harris has proposed raising the corporate tax rate to 28% from the current 21%, after she had previously supported a 35% corporate tax rate during her short-lived presidential campaign in the 2020 cycle.
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The Harris campaign has described this as a “fiscally responsible way to put money back in the pockets of working people and ensure billionaires and big corporations pay their fair share.”
On the presidential campaign trail stopping in battleground states, Vice President Kamala Harris (R), accompanied by her running mate Minnesota Gov. Tim Walz, walks out into a rally in Glendale, Arizona on Friday August 9, 2024. (Melina Mara/The Washington Post via Getty Images / Getty Images)
The Tax Foundation’s analysis estimates that Harris’s overall plan would increase taxes by $4.1 trillion from 2025-2034, while reducing long-term GDP by 2%, reducing wages by 1.2%, and resulting in the loss of 786,000 jobs over that period.
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“The economic harm from Harris’s tax hikes would also greatly reduce the ability to address an emerging debt crisis,” the report reads, noting that debt-to-GDP ratio is expected to hit 201% in 40 years under current law, while Harris’ tax plan on a conventional basis would reduce the debt-to-GDP ratio to 189%.
“However,” it continues, “after factoring in reduced tax collections and a smaller economy, the debt-to-GDP ratio would decline only slightly, to 200 percent.”
FOX Business’ Eric Revell and FOX News’ Adam Schemmel contributed to this report.