Vice President Kamala Harris pledges that if she wins next month, under her administration “the super wealthy and large corporations will pay their fair share.” But nonpartisan congressional analysts said Friday that such campaign plans are unlikely to generate the amount of revenue the Biden-Harris administration previously estimated.
The Harris campaign has said it endorses much of President Joe Biden’s plans for raising taxes that he outlined in the fiscal 2025 budget request submitted to Capitol Hill in March, with some recent changes. That plan contained an advertised $4.9 trillion worth of tax increases over a decade that would impact corporations and upper-income households, defined as those earning above $400,000 annually.
But the Joint Committee on Taxation, in conjunction with the Congressional Budget Office, conducted its own analysis that found that several key tax proposals in the Biden budget plan would generate $1.1 trillion less in revenue over a decade than the White House budget office and Treasury Department had forecast.
Corporate rate increase. Nearly half of that difference stems from a more conservative estimate of the revenue that can be gained by raising the corporate income tax rate from 21 percent to 28 percent. That proposal would increase revenue by $881 billion over the coming decade, or $469 billion less than the White House estimates, the JCT and CBO said.
The reason for the huge disparity wasn’t immediately clear, but the CBO estimated sharply lower growth in the overall economy, wages and salaries over the next decade than the administration did, which usually also means lower business profits. The CBO said “baseline” gross domestic product will be $3.6 trillion smaller and wages and salaries $3 trillion smaller over a decade, and tax revenue comes in $2.7 trillion lower than the White House forecast.
Don Schneider, a former GOP aide for the House Ways and Means Committee who’s now deputy head of U.S. policy at investment bank Piper Sandler, wrote on X that one reason could be the JCT anticipates more profit-shifting maneuvers to duck the corporate tax if the rate increases by that much.
IRS enforcement. A Biden plan to increase funding for the IRS to beef up tax enforcement would yield $201 billion in new revenue over roughly a decade, or $140 billion less than the White House projects, the CBO said.
It’s been standard in recent years for the CBO to estimate sharply lower revenue collections as a result of beefed-up tax enforcement than Treasury has, a disparity that emerged during the 2021 budget reconciliation debate.
Stock buybacks. A plan to quadruple the excise tax on the repurchase of corporate stock would fall $87 billion short of White House projections, the JCT said, ending up at less than half of the $166 billion that Treasury estimated.
No reason was given, but it could also have to do with less robust buyback activity in response to the higher tax — similar to what occurred in 2023, when S&P 500 companies’ buybacks dropped by nearly 14 percent in the first year after the current 1 percent excise tax was implemented. Buybacks have since rebounded, however, and could be headed for new record highs, according to Goldman Sachs and others.
Other big drop-offs from the Treasury estimate include roughly 20 percent less revenue than expected from increasing taxes on profits earned overseas and further limiting deductions for compensation of highly remunerated employees.
All told, the tax proposals in Biden’s budget that the JCT was able to analyze would generate $2.8 trillion in new revenue over a decade instead of the $3.9 trillion claimed by the White House.
Insufficient details
The agencies cautioned that they couldn’t analyze all of Biden’s budget proposals because they lacked sufficient detail in some cases.
Unrealized gains, “stepped-up” basis repeal. The CBO said it couldn’t offer analysis for roughly two dozen revenue proposals that the administration says would generate an extra $1 trillion, on net, over a decade.
Those include a proposal to impose a new minimum income tax of 25 percent on taxpayers whose wealth exceeds $100 million — including any paper gains on assets that haven’t yet been sold. Treasury said that plan, which has run into sharp criticism from Silicon Valley and top Democratic donors, could raise over $500 billion.
Another plan, which Treasury said would raise $289 billion, would have raised the base capital gains tax rate to 39.6 percent — or 44.6 percent after a separate investment income tax is factored in — for those earning at least $1 million. Harris has since backed off this high of a rate, reducing the proposal to a top capital gains rate of 28 percent, or 33 percent all-in.
The Biden plan would have also subjected inherited assets above a $5 million threshold to immediate capital gains tax at the original cost basis, rather than the current “stepped up” basis that exempts any asset appreciation during the decedent’s lifetime from capital gains tax an heir would pay. That proposal has also run into concerns from farm country and among family-held businesses.
Meanwhile, the nonpartisan Committee for a Responsible Federal Budget took a shot at estimating the full costs of Harris’ budget plans as well as those of former President Donald Trump.
From what’s been made public so far, the think tank said a middle-ground range for Harris’ plans would be to increase deficits by a net $3.5 trillion over a decade. Despite tax increases on the rich and corporations, the vice president’s campaign proposals also include some pricey new programs and extensions of expiring policies, the group said.
Trump’s proposals would add more than double that amount to the debt: $7.5 trillion over 10 years on net, the CFRB said, with new broad-based import tariffs bringing down the gross cost by about $2.7 trillion and reversals of green energy subsidies offsetting hundreds of billions more.
Peter Cohn contributed to this report.
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