Kamala Harris’s tax increases and cuts take shape

Harris, the Democratic nominee for president, would increase taxes by about $5 trillion over the next decade and cut other taxes by more than $4 trillion. The federal government’s total collections—projected at $63 trillion over 10 years—would be little changed, but the Harris agenda would shift who pays.

Under her plan, taxes would go up sharply on some high-income households, and top marginal tax rates would reach their highest point since 1986. The wealthiest investors and company founders would encounter sizable capital-gains tax bills that they don’t face under current law.

Tax policy marks one the biggest gaps between the two major parties, and even slim congressional majorities could yield enormous differences in corporate profits and household finances—particularly for the richest Americans. Harris hasn’t discussed her tax plans in deep detail, but her campaign has indicated her support for President Biden’s proposed tax increases, and she rolled out a child tax credit expansion earlier this month that went beyond Biden’s agenda.

A Democratic sweep of the White House, Senate and House could allow Harris to get many of her fiscal plans enacted, though intraparty disagreements and slim vote margins could prevent the full agenda from becoming law. A 2025 Democratic Senate majority wouldn’t include retiring Joe Manchin of West Virginia and Kyrsten Sinema of Arizona, who blocked many of Biden’s tax plans in 2021 and 2022. But other Democrats could take their place as a limiting force in a narrowly divided chamber.

Even if Democrats don’t win full control of Congress, a Harris administration would be thrust immediately into a tough tax negotiation in 2025 with Republicans: Major pieces of the 2017 tax law expire at the end of next year absent congressional action, an outcome that lawmakers in both parties want to prevent. The expiration could give Harris leverage to demand support for some of her tax priorities. If the president and Congress do nothing, about 62% of households will see their taxes go up in 2026, according to the Tax Foundation.

Former President Donald Trump, the Republican nominee, wants to extend all the expiring tax cuts, for a total of $4 trillion over a decade. On top of that, he proposes to layer further cuts—a lower corporate tax rate and tax exemptions for tips and Social Security benefits—and running mate Sen. JD Vance (R., Ohio) has talked about a larger child tax credit. Trump also would impose tariffs that would recoup some of that lost revenue but also raise consumers’ costs.

Harris has endorsed Biden’s proposed tax increases

Harris wants to do far more than address the expiring tax cuts, and her campaign has endorsed all of the proposed tax increases from Biden’s most recent budget.

Under that plan, the top marginal income-tax rate for individuals would climb to 44.6% across almost all income types, compared with today’s lower top rates (23.8% on capital gains, 29.6% on some business income and 40.8% on wages). High-income people would still pay lower rates on some of their income, but those marginal rates at the top matter because they can affect decisions about investments.

Harris, adopting Biden’s plan, also would create a novel system that would tax the unrealized capital gains of people with net worth exceeding $100 million. Capital gains currently aren’t taxed until assets are sold, and they are exempt from income tax at death, giving people an incentive to hold assets and pass them to heirs. (Estate taxes can still apply.)

Under the Harris plan, that top slice of households (about 0.01%) would pay an annual minimum tax of 25% of their income—using a broader definition of income that includes unrealized gains. The proposal contains provisions that let taxpayers spread out payments, helps them deal with the difficulty of assessing hard-to-value assets and addresses liquidity constraints. The most far-reaching Harris tax proposal, it might be the least likely to become law and survive court scrutiny.

At an event at a Las Vegas restaurant last week, Trump claimed that Democrats would eventually seek to expand any tax on unrealized gains. “[It] will soon be applied to small-business owners and you will be forced to sell your restaurant immediately," he said.

Under Harris, capital gains for households making at least $1 million would be taxed as ordinary income. Unrealized capital gains, above a $5 million per-person exclusion, would be taxed at death. That tax would have some exemptions for family businesses, residences and personal property.

“These would represent sea changes in how we have taxed wealthy individuals and families over the last several decades, and that’s not an argument for or against them," said Andrew Lautz, an associate director at the Bipartisan Policy Center.

Corporations would face a 28% tax rate, up from 21% today, and large companies would pay a 21% minimum tax instead of the current 15%. They also would pay higher taxes on foreign profits. The higher corporate rate would apply on a broader tax base because the 2017 law removed some breaks, and the increase would push the U.S. back toward the high end of countries’ tax rates.

“Vice President Harris’s campaign pledge to raise the federal corporate tax rate to 28% would have devastating consequences, resulting in higher prices, lower wages and fewer jobs," said a statement from the RATE Coalition, a group of companies that includes Target and Altria.

No increases on households making under $400,000

For all of Harris’s disagreements with Trump, she has also promised to prevent any tax increases on households making under $400,000, extending most of the expiring Trump tax cuts. (For this purpose, Democrats ignore the effects of corporate tax increases on middle-income workers and shareholders.)

Such a policy effectively would lock her in to extending most of the 2017 tax law that she and every other Democrat in Congress voted against. During her 2020 presidential campaign, she had proposed repealing the Trump tax law.

Harris has proposed additional tax cuts on top of those extensions. She would revive the expanded child tax credit that was in place for 2021, which gives households $3,000 for most children and $3,600 for those under age 6.

“All families, they love their children but don’t always have the resources that are necessary to do all that they hope and pray and desire for their children," she said in a 2021 speech.

As president, Harris would add another tier for newborns with that year’s tax credit worth $6,000.

“Instead of a Trump tax hike, we will pass a middle-class tax cut that will benefit more than 100 million Americans," she said while formally accepting her party’s nomination last week at the Democratic National Convention in Chicago.

She also would revive an expanded version of the earned-income tax credit for low-income families, continue larger tax-credit subsidies for health and exempt some tips from taxation—an idea first popularized by Trump.

Parents, in particular, would see their taxes go down, Lautz said. Some people would leave the income-tax rolls while others who already get net benefits from the income-tax system would get even larger refunds.

What about SALT?

Harris has left a few blank spaces in her plan. Namely, like Biden, Harris hasn’t said what she wants to do with the $10,000 cap on state and local tax deductions. The limit, which also expires at the end of 2025, is wildly unpopular in Democratic states such as New York, New Jersey and California, and letting it lapse is a priority for lawmakers such as Senate Majority Leader Chuck Schumer (D., N.Y.). As a senator from California in 2019, Harris co-sponsored a bill to repeal the cap.

But the cap does an effective job of raising revenues from very high-income households—the same people that Democrats are trying to tax more. If Democrats have full control of Congress and the White House, they will be torn between the revenue a cap could bring and their own opposition to it.

And although the Biden-Harris tax proposals would change the rules applying to capital gains at death, Harris also hasn’t said what she wants to do with the estate-tax exemption. If Congress does nothing, the per-person exemption, which is now $13.6 million per person, would be roughly cut in half in 2026.

Write to Richard Rubin at richard.rubin@wsj.com