An Objective Review of Kamala Harris’s Tax Program: A Tax Consultant’s Perspective

Hello, I’m Kevin Jerry, the owner of one of the most diverse Tax Consulting firms in the nation. With a master’s degree in taxation and over fifteen years of experience, I take pride in offering top-notch services to my clients.

I chose to set aside my personal feelings towards Democratic Presidential Candidate Kamala Harris and assess her proposed tax program and policies objectively. While I may have negative opinions about her and her VP pick, Tim Walz, I realize that I might be forming judgments without considering all the facts. Just as I advise others to do with former President Donald Trump, it was time for me to follow my own advice.

Here is what I found:

• Democrats are not willing to allocate more funds towards childcare, healthcare, housing, higher education, and support for undocumented immigrants. When questioned about funding these additional expenses, their response typically involves taxing the wealthy and corporations. However, substantial tax increases would push residents in states like California, New York, Illinois, Vermont, and New Jersey to close the 50 percent tax bracket. As tax rates escalate, individuals may be discouraged from making more income or investing further due to the increased effort and risk involved. Consequently, higher tax rates could result in reduced tax revenue. This sentiment is supported by The Washington Post, known for its liberal stance.
• In response to this issue, discussions have shifted towards more unconventional approaches to taxing the wealthy, such as taxing unrealized capital gains. Historically, the United States has only taxed these gains upon asset liquidation and has never taxed potential gains on paper. The Biden and Harris administration proposes implementing a 25 percent minimum tax for individuals with assets totaling $100 million or more, which encompasses unrealized capital gains. This proposal would mandate that taxpayers with a net worth exceeding $100 million pay a minimum tax rate of 25 percent on a broader income calculation that involves unrealized capital gains. This plan raises numerous questions, including:
  • The proposed “billionaire” tax introduces a highly intricate tax system targeting a narrow segment, an approach never attempted before. This scheme would create significant compliance difficulties for taxpayers and pose challenging administrative hurdles for the IRS. Moreover, it could weaken the economy by increasing taxes on savings and free enterprise. How does this encourage business owners to make investments?
  • The tax targets individuals with assets exceeding $100 million initially, but lowering this threshold could inadvertently increase taxes without a formal tax hike. Is this a plausible scenario?
  • When assets lose value due to depreciation, do taxpayers receive refunds from the IRS? This seems unlikely.
  • What if the taxpayer’s minimum tax is less than 25%? The theory is that taxpayers calculate their tax rate for the minimum tax, and if it falls below 25 percent, they owe additional taxes to bring their effective rate to 25 percent. This approach is NOT a sound tax policy.
  • What happens if the taxpayer has unrealized gains but lacks the funds to pay?
  • I could continue endlessly, but I’m sure you understand the concept.
• The minimum 25% tax changes distort investment decisions as investments shift toward hard-to-value assets such as real estate, farms, mineral rights, art, and timber. Surprisingly, as reported by the Peter G. Peterson Foundation, these taxes generate only $500 billion over ten years.
• Harris is determined to raise the corporate (C-Corp) rate from 21% to 35%, aiming to increase federal revenues. However, economists express concerns over potential negative impacts on the economy and U.S. competitiveness with such an increase. According to an analysis from the Tax Foundation, even a moderate increase to 28% could lead to a $720 billion reduction in GDP over the next decade. This projection is based on the assumption that higher corporate taxes would elevate a company’s capital costs, effectively counteracting the billionaire tax. A jump to 35% could result in a GDP decrease of over a trillion dollars. The question remains – is this a reasonable course of action?
• Our national debt stands at a staggering 99 percent of GDP. Projections indicate that these numbers will increase as more baby boomers retire and utilize Social Security and Medicare. Without identifying spending cuts, such as in illegal immigrant support, Harris may need to raise taxes significantly on some groups. As mentioned earlier, solely targeting the “rich” is not a viable option. So, who will bear the burden?
• Harris has committed to not increasing taxes for individuals earning less than $400,000 annually. However, there is a challenge in generating sufficient tax revenue to support current obligations and the additional spending proposed by the Democratic party. It boils down to basic arithmetic. Individuals earning over $400,000 contribute 66% of all income taxes, with close to 50% coming from the top 1 percent. Upholding the pledge to refrain from raising taxes for those below $400,000 presents a significant dilemma. It is challenging to eliminate tax loopholes, such as bonus depreciation, that affect individuals below the $400,000 threshold, and raising marginal rates on their initial $400,000 of income is also restricted. The feasibility of honoring this “promise” seems uncertain.
• I don’t expect a politician in a tight campaign to announce middle-class tax hikes. But Democratic voters should understand that they can’t have the spending they want without sharp tax increases on the middle class. Again, it’s simple math. Harris and the Troll should also understand they can’t ignore our deficit and, at the same time, increase spending while also promising the spending will be paid by somebody else.
• A politician engaged in a competitive campaign would be unlikely to propose tax hikes for the middle class. However, Democratic voters need to realize that the desired spending cannot be achieved without significant tax raises for the middle class. Again, it’s simple. Harris and Walz should acknowledge the importance of addressing the deficit and the necessity of balancing increased spending without relying on others to foot the bill.

In conclusion, while Kamala Harris and Tim Walz’s proposed tax policies aim to address critical issues such as healthcare, education, and support for undocumented immigrants, they present significant economic and logistical challenges. The proposed billionaire tax, along with raising the corporate tax rate, could have far-reaching implications on investment decisions, economic growth, and U.S. competitiveness. Additionally, the promise of not increasing taxes for those earning less than $400,000 annually seems nearly impossible to sustain without substantial adjustments elsewhere. As voters, it is crucial to critically analyze these policies and understand the potential trade-offs. Fiscal responsibility and realistic funding strategies are essential to ensure that any new spending initiatives are sustainable without placing undue burden on any single segment of the population. Thank you for taking the time to explore these complex but important issues with me. Your informed perspective is vital in shaping the future of our nation’s economic landscape.