America is on the road to financial ruin and the dollar’s hegemony on the world stage is increasingly under assault. Our largest export is the dollar with its full faith and credit resting on Americans ability to pay taxes. Vice President Harris’ tax plan fails to capture the exigency of the moment with our national debt topping 35.8 Trillion dollars and each taxpayer on the hook for $271,888 dollars. Her plan avoids our fiscal reality, assumes we can tax our way out of this mess, and ignores second order economic effects.
Vice President Harris has given her support for Biden’s FY 2025 budget that would raise taxes to generate over 3 Trillion in revenue for the coming decade of 2024-2034. The overall impact of this budget for her first year in office if elected would turn out to be increased complexity, and increasing marginal tax rates on wages, work, savings, and investments. The tax foundation estimates the long-run impact of this opening salvo to be a loss of 1.6% of GDP, wages dropping by 1.1% and nearly 700k jobs disappearing.
A key component is the pledge to tax unrealized capital gains on the wealthy. This alone will be hard to achieve and does not spell out what happens to the cost basis? Does it change each year? Who knows and the analogical reasoning of saying you pay taxes on house appreciation through property tax does not pass muster when tax values are often significantly lower than market value. The comparison as logic for this aspect of their tax scheme is dubious and misguided including their retirement linkage. Referencing required minimum distributions and tax realization that can wait sometimes 50+ years until one is 73 to show tax capture hurts her implicit argument.
Under a President Harris she proposes to chart a new way forward. Americans do not need a new way forward through a tax maze, with shifting loopholes clouded by stagnation and inflation. Please show us the path upward not forward! This election is not about going backwards or forwards, it’s between moving up or moving down. Her slogans and pitches remind me of candidate Obama promising to cut the national debt in half. Reality struck and it did not happen. Her economic assumptions fail to consider the current weight of debt, the cost of her economic wishlist, and its hostility to American businesses.
Every business is a collection of workers and therefore families, you cannot harm the business and help the family. Increasing the corporate tax rate and small business startup tax deduction only takes money from one hand and gives to the other, the overall impact is a loss of competitiveness, investment, and jobs. Tack on increasing taxes for corporate buybacks, which create an inherent demand for a company’s stock, and you weaken the market for every public company and the employees who hold those stocks in IRAs and 401ks.
Further it was her administration’s policies that caused record inflation, not corporations artificially raising prices to gouge consumers. The much touted Inflation Reduction Act helped create and exacerbate record inflation. The reduced inflation came through interest rate pain not legislation. In short, her topline tax plan estimates are similar to the Biden-Harris budget, her plan projects to lower GDP or the size of our economic pie, wages, and kill jobs while raising new money for new programs likely leading to a larger national debt. Accelerating a debt and interest doom loop.
The way upward is actually not complicated, legislators must get spending under control. The first step should be a whole of government approach to rein in spending to pre-covid levels. Any tax plan or policy not dealing with this fact is avoiding the gravity of our current circumstance. The next step would be to work towards a balanced budget on those pre-covid spending levels. Once this is accomplished and growth expands, progress must be made on the national debt to include a balanced budget constitutional amendment. These actions would put us on a path to real progress and economic stability.
David Hursey is a policy analyst who served on Utah’s COVID-19 Economic Response Task Force and as Special Assistant to the president of the Salt Lake Chamber. He has worked on Capitol Hill in Washington, DC and several presidential and congressional campaigns. He holds a Master’s degree in Middle East Studies and Political Science from The University of Utah and lives in Salt Lake City.
