Harris Announces Economic Proposals to Lower Living Costs

(Reuters) – U.S. Vice President Kamala Harris has announced a basket of economic proposals aimed at lowering living costs for middle- and lower-class Americans and boosting the economy overall through tax incentives and other adjustments.

Some initiatives build on President Joe Biden’s unfinished economic agenda but expand in scope and size.

INDUSTRIAL INCENTIVES

On Wednesday, Harris pledged new tax credits to encourage domestic manufacturing and investment in key sectors that will “define the next century,” including biomanufacturing, aerospace, artificial intelligence, quantum computing, blockchain, advanced nuclear power, and batteries.

Tax incentives will also be offered for expanding “good union jobs” in traditional industrial communities. Specifics on the size and scope of these incentives have not been disclosed.

Additionally, investments in U.S. basic technology research will be made through the National Science Foundation, the Department of Energy’s National Laboratories, and other institutions.

Plans to expedite infrastructure and industrial project construction by cutting red tape were also announced. Harris aims to use the Defense Production Act and other tools to boost U.S. capacity for processing critical minerals and decrease reliance on supplies from China.

TAX ON THE WEALTHY

Harris reiterated Biden’s commitment not to raise taxes on households earning less than $400,000 annually. She endorsed much of the nearly $5 trillion tax increases proposed in Biden’s fiscal 2025 budget, which would elevate the top income tax rate from 37% to 39.6%.

Key measures include a 25% minimum tax on individuals with fortunes over $100 million, including unrealized capital gains, and a proposed increase of the long-term capital gains tax for those earning over $1 million from 20% to 28%.

TAX ON BUSINESSES

Harris has suggested raising the corporate tax rate to 28%, reversing part of Donald Trump’s 2017 tax cuts that lowered taxes from 35% to 21%. It is estimated this would generate $1 trillion for the federal government over a decade but may affect company profits negatively.

Large U.S. companies currently face a lower effective tax rate than their foreign counterparts, averaging 16% according to a Reuters analysis. Any corporate tax changes would require Congressional approval.

CHILD TAX CREDIT

Harris plans to restore a one-year, COVID-19-era increase in the Child Tax Credit permanently, raising it to as much as $3,600 per child from the current $2,000, which is set to fall to $1,000 post-2025. A proposed $6,000 bonus onetime credit for families with newborns is also part of the plan.

AFFORDABLE HOUSING

Plans to stimulate new construction and lower costs for renters and homebuyers include tax credits for builders of homes for first-time buyers and a $25,000 tax credit for down payments, effective for four years.

Harris proposes a $40 billion “innovation fund” to encourage local governments to build more affordable homes. She targets an increase in U.S. housing construction by 3 million units over the next four years, addressing the 50% rise in home prices and 35% increase in rents over the past five years.

SMALL BUSINESS TAX CREDIT

Harris proposes increasing the tax deduction for new small business start-up costs from $5,000 to $50,000, supporting entrepreneurs among the 33 million U.S. small businesses responsible for 70% of net new job creation since 2019.

CHILD CARE

Harris has pledged that no working family should pay more than 7% of their household income for child care, significantly lower than the current average of 19.3%. However, details on the execution of this plan have not been specified.

HIGH GROCERY PRICES

Harris has committed to enacting the “first-ever federal ban on price gouging on food and groceries” to prevent corporations from exploiting consumers with excessive prices, although clear definitions of excessive price hikes remain unclear.

Some proposals in the U.S. Senate might provide a path toward enactment.