Julia Nikhinson/AP Photo
Democratic presidential nominee Vice President Kamala Harris speaks as second gentleman Doug Emhoff, from left, Democratic vice presidential nominee Minnesota Gov. Tim Walz, and his wife Gwen Walz listen at a campaign event in Rochester, Pennsylvania, August 18, 2024.
Kamala Harris has been trying to go beyond Joe Biden’s proposed program in several respects, including a larger Child Tax Credit, more investment in housing, and more generous subsidies under the Affordable Care Act.
But last week, Harris threw a couple of bones to her large donors by walking back Biden’s proposed capital gains tax increase and proposing a modest new tax break for small-business startups.
Speaking in New Hampshire last week to a small-business audience, Harris said: “If you earn a million dollars a year or more, the tax rate on your long-term capital gains will be 28 percent under my plan, because we know when the government encourages investment, it leads to broad-based economic growth and it creates jobs, which makes our economy stronger.” The language is mirrored on Harris’s new issues page.
If you unpack that sentence, the second part contradicts the first, unless you know (as millionaires would) the fact that her proposed top rate is a lot lower than Biden’s. First point: Rich people need to pay their fair share. Second part, rich people create jobs and growth, so let’s not tax them too much—the usual, thoroughly discredited supply-side BS.
Is 28 percent high, or low? She tries to have it both ways.
How big a deal is this? It doesn’t cost the Treasury that much money, but it sure looks like hell.
According to our friends at the Institute on Taxation and Economic Policy, Biden’s proposed increase in the capital gains tax, from the current 20 percent to a maximum of 44.6 percent, plus his proposal to end the current provision that washes out capital gains taxes owed when assets are inherited (known as carryover basis), would raise a total of $289 billion over ten years.
Harris proposes to lower the highest rate on capital gains to 28 percent (which will actually be 33 percent with the tacked-on Medicare surcharge), but to keep the Biden proposal to end the inheritance loophole. That would probably reduce the net new money raised by something like $50 billion, or $5 billion a year. As our colleague David Dayen has written, the proposed new tax break for small-business startups would cost about another $11 billion over ten years.
These are not massive sums, but Harris’s posture poses three problems. First, given all of her new program proposals, Harris needs to be raising more tax revenue, not less, and $61 billion is not chump change.
The only decent place to get that revenue is from rich people, who have been capturing more and more of the national income and wealth. This challenge is compounded by the Biden-Harris commitment not to roll back any of the 2017 Trump tax cut for households with incomes of $400,000 or less.
The second problem is that even though massive sums are not involved, the rollback creates the impression that Harris is caving to the pressure of some of her billionaire donors such as Mark Cuban, who have been flagrant in their demands that she back off proposals to tax the rich.
The third problem is that these gestures compound the image of Harris as a flip-flopper. She is already being depicted as one who opportunistically changes positions because of her reversal of previous support for a ban on fracking.
Compared to Trump, of course, Harris is a model of steadfast consistency. But she doesn’t need to muddy that distinction. In sheer political terms, there was a reasonable case for her to abandon the fracking ban because of the imperative of carrying Pennsylvania. But other than as a sop to a few loudmouth donors, it’s hard to believe that a modest reduction in a proposed capital gains hike will attract many of the very rich who were otherwise inclined to vote for Trump.
Nor has Harris addressed whether she still supports the most aggressive part of Biden’s tax package, taxing unrealized capital gains. That’s the one that has produced the most massive donor pushback. Will she cave on this idea, too?
This is all mostly shadowboxing in any case, because these changes require legislation. Unless Harris wins by a landslide, corporate Democrats in both chambers are likely to block any serious increase in taxation of the rich.
This whole saga is a reminder that the splendid Democratic unity on display at the national convention temporarily papered over all of the schisms in the Democratic Party. The most serious and potentially disabling of these is the power of corporate Democrats. Harris will have all the campaign money she needs from multiple sources, and she gains nothing by pandering to the rich.
