Key Points
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.
The 2024 Harris Campaign Policy Proposals: Budgetary, Economic and Distributional Effects
The 2024 Harris presidential campaign recently announced several spending and tax policy proposals. Building on President Biden’s Fiscal Year 2025 budget, Harris would expand existing benefits for low- and middle-income households in the tax code and create new subsidies to support homeownership. The cost of these benefit expansions would be partially offset by raising the corporate income tax rate.
Several media outlets have reported that the Harris campaign supports the tax provisions proposed in President Biden’s FY 2025 budget, which we previously analyzed in detail. However, numerous tax and spending provisions in the FY 2025 budget were not mentioned in the campaign’s official announcement noted above. Our analysis of the FY 2025 budget also estimates less revenue than stated by the White House in the FY 2025 budget. The Harris campaign increases some of the spending provisions in the FY 2025 budget, which we analyze below. However, the Harris campaign has not indicated in any official release whether they support all the tax provisions in the FY 2025 or whether they support the spending provisions in the FY 2025 budget which were not included in their official announcement.
[The following paragraph was added on 9/3/2024]
Presumably, any statement of support for the FY 2025 budget in response to a media question should be interpreted more holistically to also include spending provisions in the FY 2025 budget that were not already included or enhanced in the Harris campaign announcement. Some media outlets also report that the Harris campaign supports extending the 2017 Tax Cuts and Jobs Act for households with annual incomes below $400,000. Following longstanding tradition, PWBM focuses on specific plans and does not score media speculation. Nonetheless, in response to numerous requests, we estimate that adding the additional revenue and spending provisions in the President’s FY25 budget—which were not already included or enhanced in the Harris campaign announcement—would add $1,229 billion in net positive revenue over 10 years on a conventional basis. Extending the TCJA for households making less than $400,000 per year produces a revenue loss of $1,464 billion under a strict “cliff” interpretation where the TCJA option is fully eliminated for a household that makes $400,001. (A phase-out that minimizes this “cliff” would require additional costs, by up to another trillion dollars over 10 years.) In total, the net effect of all these additional provisions represents an additional revenue loss of $235 billion over 10 years, that is, in addition to the revenue losses that we report below.
The Harris campaign has not released material details associated with some of its proposals in their official announcement cited above. In this brief, we analyze the policy ideas for which enough information is available. For example, we do not include the non-taxation of “tips” earned by service workers since the 10-year budget cost could vary significantly depending on the ability to reclassify current sources of income as “tips” to the mutual benefit of employers and employees. The ability to reclassify income is often a major source of revenue response in conventional tax scoring. As such, a considerable number of additional details would be needed to score this provision.
The Harris campaign proposals would reduce taxes on low- and middle-income households by expanding the Child Tax Credit (CTC), expanding the Earned Income Tax Credit (EITC), increasing premium subsidies for health insurance under the Affordable Care Act (ACA), and providing down payment assistance to qualified first-time homebuyers. It would also increase corporate taxes to partially offset the costs of those proposals. More specifically:
Expanding the Child Tax Credit. Under current law, eligible families receive a tax credit of up to $2,000 per child, a portion of which is refundable ($1,700 in 2024). Starting in 2026, the total credit amount will decrease to $1,000. Under the Harris campaign policy proposal, starting in 2025 the credit amount would instead permanently increase to $3,600 per child 5 years and younger, and to $3,000 per child older than 5 years. The proposal would also increase the maximum age of eligible children from 16 to 17 and make the credit fully refundable. These proposed permanent changes generally correspond to the temporary CTC provisions enacted under the American Rescue Plan Act (ARPA). Furthermore, families with newborns would receive an additional $2,400 fully refundable credit during the first year of the child’s life, bringing the total maximum credit value to $6000 for newborn children.
Expanding the Earned Income Tax Credit. Under current law, in 2024, the earned income tax credit for childless workers has a much less generous maximum credit value and phasing structure than the EITC for workers with children. The policy proposal from the Harris campaign would adjust the credit structure to be more generous to workers without children, generally in line with the temporary EITC expansion under the ARPA, on a permanent basis.1 In addition to the adjusted maximum credit and phasing structure, the proposal would also set the eligible age range to 19 and above, whereas the current law age range is 25-64.
Permanently extend enhanced premium tax credits. This proposal would extend the lower contribution percentages of household income used for determining the premium tax credit under the ACA, as previously enacted in the ARPA and extended by the Inflation Reduction Act (IRA).2 Those parameters are set to expire, rendering the subsidies less generous after 2025; this policy would instead make them permanent.
Providing down payment support for qualified first-time homebuyers. This proposal would provide an average of $25,000 in assistance to qualified first-time homebuyers. The benefit would be available for four years. Although the Harris campaign included few details, it cites a closely related Biden-Harris administration proposal from earlier this year. We assume that details not provided would broadly follow the prior proposal.3
Raise the corporate income tax rate to 28 percent. Under current law, corporations pay a statutory tax rate of 21 percent on their taxable income. This proposal would raise that rate to 28 percent. That would reverse one half of the statutory corporate tax rate reduction enacted as part of the 2017 Tax Cuts and Jobs Act, which lowered the rate from 35 percent to 21 percent.
Table 1 presents the annual and 10-year conventional budgetary cost estimate for the proposed policies outlined above.4 PWBM projects that the Harris campaign proposals would increase primary deficits by $1.2 trillion on net over the 10-year budget window from 2025 to 2034.
| Provision | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | 2032 | 2033 | 2034 | 2025 - 2034 |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Individual | |||||||||||
| Expand the CTC to $3,000/$3,600 | -22 | -135 | -188 | -189 | -188 | -188 | -188 | -188 | -188 | -188 | -1,662 |
| Increase CTC to $6,000 for newborns | -3 | -13 | -15 | -15 | -15 | -14 | -14 | -14 | -14 | -14 | -132 |
| Expand the EITC | -1 | -14 | -14 | -14 | -14 | -14 | -14 | -14 | -14 | -14 | -126 |
| Permanently extend enhanced premium tax credits | 0 | -2 | -22 | -23 | -25 | -26 | -28 | -31 | -33 | -35 | -225 |
| Down payment support for first-time homebuyers | -26 | -34 | -35 | -34 | -9 | 0 | 0 | 0 | 0 | 0 | -138 |
| Subtotal: Individual | -52 | -198 | -273 | -276 | -250 | -243 | -245 | -247 | -249 | -251 | -2,282 |
| Business | |||||||||||
| Raise the corporate income tax rate to 28 percent | 69 | 96 | 104 | 112 | 114 | 115 | 117 | 121 | 122 | 126 | 1,096 |
| Subtotal | 69 | 96 | 104 | 112 | 114 | 115 | 117 | 121 | 122 | 126 | 1,096 |
| Net Effect on primary deficit (-) or surplus (+), conventional | 17 | -102 | -170 | -164 | -135 | -127 | -128 | -126 | -126 | -124 | -1,186 |
| Memorandum: | |||||||||||
| Net Effect on primary deficit (-) or surplus (+), with dynamic effects | -66 | -210 | -213 | -222 | -196 | -201 | -218 | -222 | -228 | -232 | -2,008 |
The Harris campaign’s proposed expansions of the CTC, EITC, and ACA premium tax credits would cost more than $2.1 trillion over the next ten years. Down payment assistance for first-time homebuyers would add another $140 billion in costs, which we estimate to assist 1.4 million homebuyers annually. Raising the corporate tax rate to 28 percent would raise about $1.1 trillion in new revenue, offsetting slightly less than half of the cost of the other provisions.
Table 2 reports the estimated effects of the Harris campaign proposals on the economy. We project that debt increases over time relative to current law while key economic variables (hours worked, capital, and GDP) fall. Households receiving more transfers would reduce their household savings and hours worked. Together with the increase in debt, investment in productive capital falls. GDP falls by 1.3 percent by 2034 and by 3.9 percent in 30 years (2054). Pre-tax wages averaged across all labor income groups fall by 0.8 percent by 2034 and by 3.3 percent in 30 years.
| 2034 | 2039 | 2044 | 2049 | 2054 | |
|---|---|---|---|---|---|
| Gross domestic product | -1.3 | -1.6 | -2.1 | -2.8 | -3.9 |
| Capital stock | -2.4 | -3.2 | -4.2 | -5.7 | -7.8 |
| Hours worked | -0.7 | -0.7 | -0.6 | -0.7 | -0.7 |
| Average wage | -0.8 | -1.2 | -1.7 | -2.4 | -3.3 |
| Consumption | -0.7 | -0.9 | -1.3 | -1.6 | -2.1 |
| Debt held by the public | 4.4 | 5.7 | 6.6 | 7.3 | 7.7 |
Accounting for dynamic (economic feedback) effects, PWBM estimates that the Harris campaign proposals would increase primary deficits by $2.0 trillion over 10 years (Table 1, Memorandum line).
Table 3 reports the conventional distributional effects of the Harris campaign proposals analyzed in Tables 1 and 2. In 2026, the bottom 95% of the income distribution see increases to their income after taxes and federal spending transfers. The 95 – 99% percentile of the income distribution experiences small decreases in their after-tax income, as the tax burden of the higher corporate rate outweighs tax benefits from expanded credits. The top 1 percent and top 0.1 percent face larger losses. These distributional relationships remain broadly unchanged between the year 2026 and 2034, although the middle and bottom of the income distribution receives a slightly smaller increase to their after-tax-transfer income, due partly to the expiration of the grant for first-time homebuyers.
| Income group | 2026 | 2034 | ||
|---|---|---|---|---|
| Average income change, after taxes and transfers | Percent change in income, after taxes and transfers | Average income change, after taxes and transfers | Percent change in income, after taxes and transfers | |
| First quintile | $2,355 | 18.0% | $2,310 | 24.4% |
| Second quintile | $2,260 | 4.8% | $2,280 | 3.9% |
| Middle quintile | $2,165 | 2.7% | $2,405 | 2.4% |
| Fourth quintile | $2,870 | 2.1% | $2,935 | 1.8% |
| 80-90% | $2,580 | 1.2% | $2,115 | 0.8% |
| 90-95% | $1,850 | 0.6% | $1,405 | 0.4% |
| 95-99% | -$880 | -0.1% | -$1,970 | -0.2% |
| 99-99.9% | -$8,965 | -0.5% | -$11,225 | -0.5% |
| Top 0.1% | -$167,255 | -0.9% | -$208,080 | -0.9% |
Unlike traditional conventional tax analysis, PWBM distributes both tax and spending proposals by income group to provide a more holistic picture. However, conventional distributional analysis does not include the higher debt burden passed to future generations who inherit a larger federal debt; nor does conventional analysis include microeconomic and macroeconomic feedback effects. These features can be incorporated using PWBM’s dynamic distributional analysis, analysis that we will report at a later date.
This analysis was produced by Kody Carmody, Jonathan Huntley, Ed Murphy, Brendan Novak under the direction of Alex Arnon, Felix Reichling, and the faculty director, Kent Smetters. Mariko Paulson prepared the brief for the website.
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Under Current law, in 2024 the credit phases in at 7.65% over the first $8,260 of earnings, reaches a maximum credit amount of $632, and then phases out at 7.65% beyond earnings of $10,330 (for single filers). The EITC is fully phased out when earnings reach $18,591 (for single filers). This proposal, which generally follows the temporary EITC provisions enacted under the American Rescue Plan Act, would adjust the EITC for childless workers so that, in 2025, it would phase in at 15.30% over the first $11,350 of earnings, reach a maximum credit amount of $1,737, and then phase out at a rate of 15.3% beyond earnings of $13,420 (for single filers). The EITC would be fully phased out when earnings reach $24,772 (for single filers). Dollar values would continue to adjust annually for inflation. ↩
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Those two pieces of legislation set the required contribution to ACA plan health insurance costs to zero for individuals making less than 150 percent of the federal poverty line (FPL), then between 0 and 2 percent for individuals between 150 and 200 percent of the FPL, 2 to 4 percent for individuals with income between 200 and 250 percent of FPL, 4 to 6 percent for individuals with income between 250 and 300 percent of FPL, 6 to 8.5 percent for individuals with income between 300 and 400 percent of FPL, and 8.5 percent for individuals with income higher than 400 percent of FPL line. ↩
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For example, the definition of a first-time homebuyer and income limitations. The Biden-Harris administration proposal draws on the Downpayment Toward Equity Act for many of its details. ↩
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The revenues effects in Table 1 are estimated on a conventional basis, meaning they do not incorporate all economic responses to changes in policy. In addition, estimates are presented in Table 1 on a “stacked” basis to capture interaction effects. This means that the revenue effect of any one proposal partly depends on the order in which it appears in the table. ↩