Vice President Kamala Harris will propose a $50,000 tax benefit for new small businesses, a campaign official said, as the Democratic presidential nominee aims to detail her economic policy vision ahead of next week’s debate with former president Donald Trump.
The new tax plan, part of a broader effort to encourage entrepreneurship, would massively expand an existing $5,000 deduction for start-up firms, said the official, who shared the plan with reporters on the condition of anonymity because it had not yet been made public. Harris is eyeing the measure as a way to draw a contrast on economic policy with Trump, who has called for cutting the tax rate paid by corporations and maintaining lower tax rates for high-income individuals, along with other policies aimed at helping lower- and middle-class taxpayers.
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The proposal is expected to be unveiled ahead of a Harris campaign speech Wednesday in New Hampshire. Advisers to the Harris campaign also have discussed including plans to bolster the safety net, such as through child-care or paid-leave expansions, alongside tax proposals, although it is unclear whether those or other policies will be in Wednesday’s announcement, two other people familiar with the matter said. The people spoke on the condition of anonymity to describe details not yet made public.
The plans will help bring Harris’s economic policy vision into focus as her team tries to assemble a presidential campaign at a breakneck pace since President Joe Biden dropped out of the race. Harris has thus far largely called for preserving the overall direction of Biden’s policies, which have embraced a more aggressive role for federal intervention in the economy than his recent Democratic predecessors supported. Her first set of economic policy proposals, released last month, struck a populist tone, calling for major new housing subsidies, a $6,000 child benefit for newborns, and the first federal ban on price gouging in the grocery and food sectors.
The new focus on small businesses and entrepreneurs is probably aimed in part at reassuring voters who believe Harris is too liberal. In addition to the $50,000 tax deduction, Harris is proposing to create a new standard deduction for small firms to expedite their tax filings, lower barriers for occupational licenses and approve incentives for state and local governments to make it easier to form start-ups, among other changes, the campaign official said.
Although support for small businesses and start-ups polls well, policymakers have long struggled with how to approve policies to spur their growth. Short of cash grants to new firms, providing tax deductions often has only a limited impact because companies tend to have only limited tax liability in their early years. Conservatives are also likely to see targeted measures as subject to be gamed by larger firms. Harris’s plan would also allow new firms to wait to claim the deduction until they first earn a profit.
The plan did not come with an estimated price tag. Harris’s first set of economic plans were estimated by nonpartisan budget analysts to cost roughly $1.7 trillion over 10 years.
“Small business and entrepreneurship are appealing politically, so they make sense for Harris to lean into as part of her pitch for an opportunity economy,” said Tobin Marcus, head of U.S. policy and politics at Wolfe Research and an economic policy staffer to Biden during the Obama administration. “But in practice, targeted federal policies to help small businesses tend to be fairly small-bore.”
A Harris campaign spokesman declined to comment on the upcoming package, the precise contents of which remain unknown. The Harris campaign also released an advertisement Tuesday, its fourth focused on the economy, attacking Trump for aiming to give tax cuts to corporations.
Roughly 62 million U.S. workers are employed by a “small business,” typically defined as having 500 employees or fewer. The White House has touted record numbers of new business applications during the first three years of the Biden administration, with Black and Latino business ownership growing at the fastest pace in more than a decade. The administration has taken credit for this small-business boom, although the rise of remote work during and after the pandemic also probably played a key role. Harris’s campaign said her small business proposals aim to spark 25 million new business applications in her first term, after the record 19 million seen during the Biden administration thus far.
“The United States is in the midst of an unprecedented small-business and start-up boom that nobody saw coming,” said John Lettieri, president and chief executive of the Economic Innovation Group, a nonpartisan policy organization. “There’s been precious little from any policymaker to harness this and keep it going.”
Lettieri added that making the start-up deduction more generous is unlikely to substantially increase the number of start-ups because federal tax liability is not a key factor in whether a new business gets started.
A Congressional Research Service report found that the existing deduction costs roughly $200 million per year.
Republicans have assailed the Biden administration’s record on business, arguing that its regulatory push through various federal agencies has stifled innovation and growth. The 2017 Trump tax cuts slashed the corporate tax rate from 35 percent to 21 percent, while also cutting individual rates and doubling the standard deduction paid by most taxpayers. Trump has talked about lowering the corporate tax rate again to as low as 15 percent. The 2017 law also created a 20 percent deduction for what are known as S-corporations – including many small businesses – that pass along their corporate income to individuals, which is set to expire in 2025.
“If Americans want more money in their pockets, the only option is to vote for President Trump,” the Trump campaign said in a statement Sunday.
It is unclear whether the upcoming policy announcement will detail Harris’s overall vision for the nation’s tax code. The Harris campaign has previously told reporters that it supports the roughly $5 trillion in tax plans outlined in the White House budget. Some outside advisers to the campaign have called for Harris to include versions of the billionaire tax and higher tax on corporations previously endorsed by Biden.
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