Kamala Harris’s Tax and Spending Proposals: What They Mean for American Families


10/28/2024 09:00am PDT

(PenniesToSave.com) – As the expiration of the 2017 Trump tax cuts approaches, policymakers are debating how to structure tax and spending plans that meet both fiscal goals and the needs of American households. Vice President Kamala Harris recently outlined key tax initiatives she intends to pursue, focusing on adjustments to tip taxes, child tax credits, and the cap on state and local tax deductions. Here’s what her proposals could mean for families in the U.S. and how they might impact the budget.

Expiring Tax Cuts and Proposed Extensions

If Congress doesn’t extend provisions in the 2017 Tax Cuts and Jobs Act, many households could see changes in their tax bills by 2025. These cuts include reduced individual tax rates and an expanded child tax credit. The child tax credit, currently set at $2,000 per child, could drop back to pre-2017 levels without new legislation. While Harris has supported continuing tax relief for households earning under $400,000, specifics on these tax extensions are still under debate. The goal is to provide continued financial support for families while minimizing strain on the federal budget.

Eliminating Federal Taxes on Tipped Wages

Harris’s proposal to remove federal taxes on tips could directly impact service industry workers, potentially allowing them to keep more of their earned income. The initiative is intended to alleviate financial stress for tipped employees like servers and bartenders who often rely heavily on tips. However, economists caution that such a policy might lead some businesses to favor a tipping structure over wage increases, which could have wider impacts on worker compensation. If implemented, this proposal could increase disposable income for service workers, potentially creating a ripple effect across the hospitality sector.

Expansion of the Child Tax Credit

The child tax credit has been a significant relief measure for many families, especially since the 2021 pandemic-related increase. Harris supports raising the credit back to $3,600 per child under age 5 and $3,000 for older children, which would help families cover essential costs in light of ongoing inflation. This increase would also make the credit fully refundable, meaning low-income families who don’t owe taxes could still receive the benefit. This measure has broad support among families, though budget analysts note it could have long-term fiscal impacts if not paired with other revenue-generating policies.

Adjusting the SALT Deduction Cap

The $10,000 cap on state and local tax (SALT) deductions, set by the Trump tax cuts, has been challenging for households in high-tax states like California and New York. By raising or removing the SALT cap, Harris’s proposal would allow taxpayers in these states to deduct more of their state and local taxes on federal returns, providing relief for middle-income homeowners facing high property taxes. Opponents argue that adjusting the SALT cap would disproportionately benefit higher-income earners in those states, though it could also ease housing affordability issues for many families.

Are These Policies Fiscally Responsible?


While Harris’s proposals aim to support American households, the broader fiscal impact remains a major concern. The national debt has already reached record levels, and interest payments alone are expected to exceed $800 billion this year—funds which could otherwise support public programs. As a result, policies like expanded child tax credits and reduced tax revenues from tipped wages would likely increase the federal deficit unless offset by revenue-raising measures or spending cuts elsewhere.

Economists warn that continued borrowing at this rate is unsustainable and that rising interest rates mean taxpayers could face mounting debt-service costs in the coming years. Without significant adjustments, these measures could further strain the budget and limit the government’s ability to respond to future economic challenges or invest in public infrastructure. Lawmakers are therefore faced with the challenge of balancing tax relief for families with the broader need for long-term fiscal stability.

Final Thoughts

Kamala Harris’s tax and spending proposals have the potential to reshape family finances across the country. By targeting specific areas such as the child tax credit, tipped wages, and the SALT deduction cap, her initiatives aim to offer relief to middle- and lower-income households. However, with the national deficit already a concern, these changes are likely to face close scrutiny as legislators balance providing immediate tax relief with maintaining fiscal responsibility.

Reference

  1. Washington Examiner – Social Security and Tax Reform
  2. Washington Examiner – Kamala Harris’s Tax Proposals