Vice President Kamala Harris
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Harris Campaign Policy Proposals: PWBM estimates that the Harris Campaign tax and spending proposals would increase primary deficits by $1.2 trillion over the next 10 years on a conventional basis and by $2.0 trillion on a dynamic basis that includes a reduction in economic activity. Lower and middle-income households generally benefit from increased transfers and credits on a conventional basis, while higher-income households are worse off.
- We project that spending increases by $2.3 trillion over 10 years while conventional tax revenue increases by $1.1 trillion, for a difference in primary deficits of $1.2 trillion. Accounting for negative economic feedback effects, primary deficits increase to $2 trillion.
- Relative to current law, GDP falls by 1.3 percent by 2034 and by 4 percent within 30 years (year 2054). Capital investment and working hours fall, thereby reducing wages by 0.8 percent in 2034 and by 3.3 percent in 2054.
- Low- and middle-income households in 2026 and 2034 fare better under the campaign proposals on a conventional basis, while households in the top 5 percent of the income distribution fare worse. These conventional gains and losses do not include the negative impact of the additional debt burden on future generations who must finance most of the spending increases.
For more information:
The 2024 Harris Campaign Policy Proposals: Budgetary, Economic and Distributional Effects -
Potential Harris Campaign Proposals for the Top Rate on Capital Gains: In recent campaign speeches, Vice President Kamala Harris has spoken about raising the top marginal rate on long-term capital gains. Official campaign sources have yet to release sufficient details about the proposal to model it fairly and effectively. However, reporting on the proposal suggests that the yet-to-be-detailed plan would add a new top rate for long-term capital gains, taxing them at 28% for filers with more than $1 million of income. Reporting also indicates that the Harris campaign is in favor of raising the net investment income tax (NIIT) from 3.8% to 5% for filers with more than $1 million of income, this has also not yet been independently confirmed by official campaign sources. Together, these proposals would amount to an all-in marginal tax rate of 33% on long-term capital gains for high income filers. Notably, this is below the all-in 44.6% top marginal rate for capital income in President Biden’s proposed 2025 budget.
Table 1 shows conventional revenue estimates for these two new proposals. They are estimate as stacked after other policies that we already analyzed in our Harris Campaign analysis released on August 26, 2024. PWBM estimates that together these two new proposals alone would raise $143.6 billion over the 10-year budget window, which offsets some of the Harris campaign revenue losses that we previously estimated in our August 26 release. Relative to the Biden FY 2025 Budget, however, these two proposals would lose $308 billion over the 10-year window.
For more information:
Potential Harris Campaign Proposals for the Top Rate on Capital Gains -
President Biden’s FY 2025 Budget: PWBM analyzes the main fiscal policy plan advanced by President Biden, as outlined in his FY 2025 budget. We estimate that President Biden’s FY 2025 budget proposal would reduce primary deficits by $1.7 trillion over the 2025-2034 budget window. Accounting for economic feedback effects, GDP falls by 0.8 percent relative to current law by 2034. By 2054, debt falls by 5.4 percent and GDP declines by 1.3 percent relative to current law. On a dynamic basis, President Biden’s plan would redistribute resources from high-income earners to lower income earners. For example, we estimate that a 40-year-old in the bottom income quintile would gain the equivalent of a $36,400 one-time lifetime transfer under the President’s proposed budget. We compare these dynamic redistribution calculations to our own estimates of conventional distributional analysis, using metrics commonly reported by scoring agencies. Conventional distributional analysis fails to account for the age of the taxpayer and other important economic effects. Once these factors are accounted for, our dynamic distributional estimates show that much of the proposal’s progressivity, as indicated by conventional distributional analysis, is mitigated.
For more information:
President Biden’s FY2025 Budget Proposal: Budgetary and Economic Effects
Former President Donald Trump
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Trump Campaign Policy Proposals: PWBM estimates that the Trump Campaign tax and spending proposals would increase primary deficits by $5.8 trillion over the next 10 years on a conventional basis and by $4.1 trillion on a dynamic basis that includes economic feedback effects. Households across all income groups benefit on a conventional basis.
- We project that conventionally estimated tax revenue falls by $5.8 trillion over the next 10 years, producing an equivalent amount of primary deficits. Accounting for economic feedback effects, primary deficits increase by $4.1 trillion over the same period.
- While GDP increases during part of the first decade (2025 – 2034), GDP eventually falls relative to current law, falling by 0.4 percent in 2034 and by 2.1 percent in 30 years (year 2054). After initially increasing, capital investment and working hours eventually fall, leaving average wages unchanged in 2034 and lower by 1.7 percent in 2054.
- Low, middle, and high-income households in 2026 and 2034 all fare better under the campaign proposals on a conventional basis. These conventional gains and losses do not include the additional debt burden on future generations who must finance almost the entirety of the tax decreases.
For more information:
The 2024 Trump Campaign Policy Proposals: Budgetary, Economic and Distributional Effects -
Potential Trump Campaign Proposal for Lifting the SALT Cap: The Trump campaign has floated a proposal to repeal the SALT cap along with a permanent extension of the expiring provisions of the Tax Cuts and Jobs Act. We estimate that this proposal, to eliminate the SALT cap entirely beginning in 2025, would cost an additional $1,169 billion on top of a TCJA extension over the 2025 to 2034 budget window.
For more information:
Lifting the SALT Cap: Estimated Budgetary Effects, 2024 and Beyond - Addendum -
Extending President Trump’s Tax Policy and Jobs Act: PWBM analyzes the main fiscal policy plan advanced by former President Trump of permanently extending the expiring provisions in the 2017 Tax Cuts and Jobs Act. We estimate that permanently extending the TCJA would cost $4 trillion over the first decade. About $3.4 trillion of revenue loss comes from a reduction in individual tax payments, with the remainder, $600 billion, coming from a reduction in corporate taxes paid. Including economic feedback effects, GDP remains mostly flat as the negative impact of more federal debt mitigates the positive gains from reduced tax distortions. Extending the TCJA is less regressive than indicated by conventional distributional analysis. It would mostly redistribute resources from future generations to those currently alive. For example, while the extension would produce the equivalent of a one-time lifetime gain of $13,400 for a 20-year-old in the bottom income quintile, the same type of household born 30 years later would be $21,800 worse off, with even larger losses accumulating for future generations.
For more information:
The Budgetary and Economic Effects of permanently extending the 2017 Tax Cuts and Jobs Acts’ expiring provisions
Other Relevant Analyses
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Policy Options for Reducing the Federal Debt: Spring, 2024: As shown in the analysis above, none of the major presidential candidates are proposing policies that would materially reduce federal budget deficits while growing the economy. In this brief, we analyze the budgetary and economic effects of three very different illustrative policy bundles that reduce federal budget deficits over time without shrinking the economy relative to current law with rising debt. The results also demonstrate how federal debt, as reported by the U.S. Treasury, falls short of measuring the true fiscal burden being shifted to future generations.
For more information:
Policy Options for Reducing the Federal Debt: Spring, 2024 -
Immigration: The budgetary impact of removing 1 million immigrants from the U.S. economy over the next decade depends on the skill distribution of the immigrant reduction. Assuming the policy is phased-in over the first decade, PWBM estimates a federal budgetary loss of $40 - $50 billion over 10 years and $350 billion over two decades. These numbers will nearly double if the policy focuses more on higher-skill workers.
Research shows that the economic impact of reducing the immigration population depends on the skill composition of the affected immigrants. Reducing the high-skill immigrant population would reduce wages for the remaining U.S. population due to a reduction in skill complementarities and technological innovation generated by the immigrant population. Even a reduction of immigrants across a broader skill base would tend to reduce U.S. wages due to underlying skill complementarities that outweigh skill substitution. However, low-skill workers who previously immigrated and remain in the U.S. would likely see a modest but temporary increase in their wages. PWBM continues to update its immigration analysis and will provide more information as details emerge of specific policy proposals.
See the background brief here about the budgetary effects of increasing high-skill immigration, which explains the basic mechanisms of how immigration impacts the federal budget.
For more information:
Budgetary Effects of Granting Green Cards to Immigrants with Advanced STEM Degrees -
Trade: The threat of trade tariffs is inherently a “game theory” problem that could lead to less or even more trade. PWBM previously estimated that the impact of an increase in tariffs and trade barriers on the federal budget and U.S. economy depends on how other countries respond to our actions. While this analysis was done several years ago, its insights remain largely unchanged for today. For example, an all-out trade war would result in little additional federal revenue---much less than a simple static score would imply and potentially even a loss in revenue---but could reduce U.S. GDP by as much as 5 percent over the next two decades. At the same time, non-U.S. countries could respond to a threat of a trade war by reducing, rather than increasing, their own trade barriers to encourage the U.S. to not enact new barriers. In this case, U.S. GDP could increase by as much as 1.3 percent over the next two decades. If all trade barriers were completely removed by the U.S. and its trading partners, then U.S. GDP could increase by as much as 8 percent over the next two decades.
See related studies here:
The Economic Costs of a Trade War
The Trade War Trade-Off: Short Term Gains Then Long-Term Losses
Decline of Globalism: Capital Flows Update
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