A Harris-Walz Administration Would Be Devastating to Taxpayers
Key Findings
- Allowing the Tax Cuts and Jobs Act to expire would raise the average federal income tax by approximately $1,100.
- It would also cause a drop in after-tax income for every group of income earners.
- During her time as a senator and while campaigning for president, Kamala Harris proposed raising taxes that would negatively impact the finances of every single American.
- Governor Tim Walz spent his way out of a budget surplus in Minnesota, all while signing tax increases into law and proposing others that the legislature rejected.
Overview
The current administration has spent nearly four years destroying Americans’ purchasing power with policies that have led to inflation not seen in decades.1-2 A Harris-Walz administration would promise to also damage taxpayers’ bottom lines by increasing existing taxes and adding new taxes on businesses and hardworking Americans alike.
As a previous presidential candidate, Vice President Kamala Harris promised to repeal the Tax Cuts and Jobs Act (TCJA), raise the rates of other taxes, and create new ways for the federal government to further reach its hands into taxpayers’ wallets.3-6
Governor Tim Walz offers more of the same based on his time in Minnesota. He squandered a large budget surplus while calling on taxpayers to entrust him with even more of their money.7-9
Looking at previous proposals and actions, both would have taxpayers across the income spectrum squarely in their crosshairs.
Allowing the TCJA to expire would increase taxes and lower take-home pay
Passing and signing the TCJA into law was a signature achievement of the Trump administration. The act provided much-needed tax relief, but key provisions are set to expire at the end of 2025.10
On the personal income tax side, the expiration of the TCJA would mean an increase in marginal tax rates at nearly every bracket.11 And the standard deduction would be cut nearly in half.12 On the business side, pass-through businesses—many of which are small businesses like sole proprietors and partnerships—would owe more in taxes because of the loss of a 20 percent deduction of qualifying business income.13-14
Both Vice President Harris and Governor Walz were members of Congress when the TCJA was passed, and both voted against the taxpayer- and business-friendly bill.15-16 Later, as a presidential candidate in 2020, Harris favored repealing provisions of the TCJA.17
Although Harris recently promised not to raise taxes on anyone making less than $400,000, her past proposals bring this promise into question.18-19 A Harris presidency would almost assuredly lead to a large portion of the TCJA being on the chopping block, if not the entire law. This would constrain the finances of taxpayers who are still trying to recover from high inflation—including those earning below $400,000 per year.
Since most of the act expires at the end of 2025, a Harris-Walz administration could raise taxes without taking any action.20 Simply doing nothing would gut much of the TCJA, causing great harm to taxpayers.
Allowing these provisions to expire would force a higher federal income tax bill on more than half of filers, with roughly another third seeing their bill go unchanged.21-22 On average, Americans would see their individual federal income taxes increase by approximately $1,100 in the first year after expiration.23 All told, every group of individual income earners would see their average after-tax income drop after expiration.24 If the individual provisions of the TCJA were allowed to expire, the federal government would raise the personal income tax bill on Americans by $250 to $350 billion per year.25-26
This siphoning of resources from taxpayers to the federal government would not go unnoticed by the larger economy. The job market outlook would drop dramatically as a result, and up to two million full-time jobs would be lost, further restraining personal finances.27
The expiration of the TCJA’s provisions would hit all income earners hard, and some would be devastated.
A couple earning $74,580, the median household income in 2022, with two children and itemizing $24,000 in deductions would see their federal income tax bill increase by $1,500.28-29 This is money earned by the parents but sent to the federal government instead of paying for summer camps, piano lessons, or a weekend of family fun.
A couple with one child that earns half the median household income, $37,290, would be forced to pay more than an additional $800 when taking the standard deduction.30-31 This money could be used to pay for a year’s supply of diapers for their newborn if the TCJA tax rates stayed in place.32
A single filer earning $40,000 with no kids and taking the standard deduction would see their federal income taxes increase by about $630.33 The same filer with one child would have their taxes increase by more than $1,000, equating to a 2.6 percent drop in take-home pay.34
The expiration of key provisions of the TCJA is just one likely outcome of a Harris-Walz administration. While this alone may seem devastating—and it is—it would only be the beginning if Harris’s other proposals came to fruition.
Kamala Harris has a history of pushing tax increases
While Vice President Harris now claims she would not increase taxes on the middle class, she was much more candid about her tax proposals as a candidate for president in 2020, and what she proposed was startling.
Harris proposed raising the top marginal income tax rate to nearly 40 percent, along with implementing a four percent tax premium on households making more than $100,000.35-36 Such a premium would hit nearly four in 10 households.37 This proposal from just the previous presidential election cycle brings into serious question her promise not to raise taxes on the middle class.
Harris also proposed going after investors, 401(k)s, and other retirement accounts that fixed-income seniors and millions of other Americans rely on.38 She wanted to tax long-term capital gains as ordinary income instead of a maximum rate of 20 percent, disincentivizing people from saving and investing.39 Even more shocking, she proposed taxing every stock trade, bond trade, and derivative transaction.40 This would eat away at the retirement accounts of not just the wealthy but also 401(k)s and IRAs of middle- and low-income Americans.
There were few tax increases that Kamala Harris did not support as a candidate in 2020. She planned to expand the estate tax to fund $315 billion in new spending.41 She favored expanding payroll taxes to incomes of more than $250,000, again bringing into question her promise not to raise taxes on those making less than $400,000.42 She has since fully endorsed a 32 percent increase to Medicare taxes.43 Harris also endorsed a carbon tax, regardless of whether the tax would be passed onto low- and middle-income workers.44
In addition to increasing and creating new taxes for individuals, she also wanted to raise the corporate tax rate, originally to 35 percent and now to 28 percent, well above the 21 percent it sits at today.45-46
As vice president, she put forward a budget with President Biden that proposed creating a 25 percent tax on unrealized gains—stocks that have accumulated value but have not been sold.47 Her campaign recently announced it would embrace this, along with other aggressive tax increases pursued by the Biden administration.48 While this proposal would start by only affecting those with incomes and assets above $100 million, it could easily be adjusted to affect more Americans once implemented.
More concerning than the tax alone, if this proposal became law, the Internal Revenue Service (IRS) would no longer be interested in only income—taxpayers would also have to prove to the IRS that their assets are below the threshold where the wealth tax would kick in. This would increase the time spent, stress, and headaches caused by filing federal taxes.
These proposals add up to a massive transfer of wealth from hard-working Americans across the country to Washington, D.C.
Vice President Harris means business about making sure everyday Americans hand over all the money she can squeeze out of them. She cast the deciding vote that gave the IRS an additional $80 billion to hire thousands of agents to scrutinize and audit tax returns.49 These additional agents are likely to take a close look at low- and middle-income earners. In 2022, the IRS performed 626,204 total audits, 548,876 of which, or 88 percent, reported income of less than $200,000.50
Regarding taxes, her running mate, Governor Tim Walz, offers more of the same.
Governor Walz squandered a budget surplus all while increasing taxes
On tax policy, there is little that differentiates Governor Walz from Vice President Harris.51-52
At the beginning of 2023, Minnesota had a massive $17.5 billion budget surplus, showing that the state was overtaxing its citizens.53-54 But instead of providing real tax relief, Governor Walz led his party by throwing peanuts at taxpayers while spending the vast majority of the surplus.55
The governor’s 2022-23 biennium budget was announced as $52.4 billion, and the budget baseline for 2024-25 was $55.5 billion.56-57 But with the large budget surplus, the actual 2024-25 budget ballooned to $70.5 billion—a 27 percent increase over what the state expected to spend just months prior.58 The budget increase was the largest in the state since the 1970s.59
By 2026-27, the state was expected to spend $1.5 billion more than it brought in through taxes.60 But in just one legislative session, Governor Walz spent his way from a record surplus to looming deficits.
To help pay for his spendthrift ways, Governor Walz raised existing taxes, created new taxes, and proposed still more taxes.
Under Walz’s leadership, Minnesota became the only state to impose an additional tax on long-term capital gains income.61 This is similar to Harris’s proposal to tax long-term capital gains as ordinary income. He also raised the motor vehicle sales tax, increasing the cost of already expensive new and used vehicles, and signed legislation that partially phased out standard and itemized deductions.62-63
But the governor was not finished. He made sure every employer and employee felt the burden of extra taxation by raising the state’s payroll tax and splitting the tax between both.64 Finally, he expanded the scope of the state’s corporate income tax.65
Since 2021, Minnesota has been one of only four states, along with California, New Jersey, and New York, to raise the rate of a major tax.66 Still, some of Walz’s other tax proposals were rejected, including an increase in the individual income tax, a 15 percent increase to the nation’s highest corporate tax rate, and a 70 percent increase to the gas tax.67-68
These tax policies are likely culprits behind Minnesota’s slow economy and outflow of people from the state. From June 2023 to June 2024, Minnesota ranked 42nd in nonfarm employment growth while its gross domestic product shrank by 0.8 percent from Q4 2023 to Q1 2024, during which time the nation’s increased by 1.4 percent.69 In 2022, the state had the 8th-highest net outflow of people in the country, with only 0.86 households moving to the state for every household that fled the heavy taxation.70 Among households earning more than $200,000, only California, Illinois, Massachusetts, and New York had lower net migration rates than Minnesota.71
Tim Walz may be a governor of a Midwest state, but his tax policy is much more aligned with East and West Coast liberals.
The Bottom Line: A Harris-Walz administration promises to punish all taxpayers.
Americans have witnessed what a Democrat administration can do to their pocketbooks through massive inflation, with the prices of gas, groceries, and housing all increasing dramatically.72
A Harris-Walz administration would promise a one-two punch by not just devaluing the dollar, but also massively increasing the dollars that taxpayers must give Uncle Sam. This transfer of wealth from taxpayers to the federal government would affect citizens across income classes. Their history and recent proposals show that any promises to limit tax increases to those making above a certain threshold are a farce.
REFERENCES
1 Liesel Crocker, “Congress can put a stop to the current administration’s reckless regulatory spending,” Foundation for Government Accountability (2024), https://thefga.org/research/congress-stop-administrations-reckless-regulatory-spending/.
2 Irina Ivanova, “Inflation hit 9.1% in June, highest rate in more than 40 years,” CBS News (2022), https://www.cbsnews.com/news/inflation-june-cpi-report-hit-new-high-40-years-9-1-percent/.
3 Jessica Dickler, et al., “Building the middle class may be a ‘defining goal’ under a Harris presidency—how that may shape a key tax credit,” CNBC (2024), https://www.cnbc.com/2024/07/26/what-a-harris-presidency-could-mean-for-her-lift-act-proposal.html.
4 Kim Yoo Jang LLP, “Navigating the political landscape: Kamala Harris’s tax policies,” Kim Yoo Jang LLP (2024), http://www.kyjcpa.com/news-updates/navigating-the-political-landscape-kamala-harriss-tax-policies/.
5 Bryan Bashur, “Kamala Harris wants to tax your retirement and 529 plans,” Americans for Tax Reform (2024), https://www.atr.org/kamala-harris-wants-to-tax-your-retirement-and-529-plans/.
6 John Kartch, “Kamala admits her carbon tax may hit consumers, “But that should never be the reason not to actually put a fee in.,” Americans for Tax Reform (2024), https://www.atr.org/kamala-admits-her-carbon-tax-may-hit-consumers-but-that-should-never-be-the-reason-not-to-actually-put-a-fee-in/.
7 Martha Njolomole, “Minnesota state budget is a disaster waiting to happen, thanks to Gov. Walz and the DFL-controlled legislature,” American Experiment (2024), https://www.americanexperiment.org/minnesota-state-budget-is-a-disaster-waiting-to-happen-thanks-to-gov-walz-and-the-dfl-controlled-legislature/.
8 Thomas Catenacci, “Tim Walz pushed a 70 percent gas tax hike—then called for a federal gas tax pause,” The Washington Free Beacon (2024), https://freebeacon.com/elections/tim-walz-pushed-a-70-percent-gas-tax-hike-then-called-for-a-federal-gas-tax-pause/.
9 Jared Walczak, “Gov. Tim Walz raised taxes as most governors cut them,” Tax Foundation (2024), https://taxfoundation.org/blog/tim-walz-tax-policies/.
10 Tax Cuts and Jobs Act, Pub. L. No. 115-97, 131 Stat. 2054 (2017), https://www.congress.gov/115/statute/STATUTE-131/STATUTE-131-Pg2054.pdf.
11 David Floyd, “What is the Tax Cuts and Jobs Act (TCJA)?,” Investopedia (2024), https://www.investopedia.com/taxes/trumps-tax-reform-plan-explained/.
12 Ibid.
13 Ibid.
14 Adam N. Michel, “Slashing tax rates and cutting loopholes,” Cato Institute (2024), https://www.cato.org/policy-analysis/slashing-tax-rates-cutting-loopholes.
15 United States Senate, “Roll call votes 115th Congress – 1st session,” United States Senate (2024), https://www.senate.gov/legislative/LIS/roll_call_votes/vote1151/vote_115_1_00303.htm.
16 Clerk, “Roll call 699 – Bill number: H.R. 1,” United States House of Representatives (2024), https://clerk.house.gov/Votes/2017699.
17 Jessica Dickler, “Building the middle class may be a ‘defining goal’ under a Harris presidency—how that may shape a key tax credit,” CNBC (2024), https://www.cnbc.com/2024/07/26/what-a-harris-presidency-could-mean-for-her-lift-act-proposal.html.
18 Adam Cancryn, “Harris maintains Biden’s pledge not to raise taxes on middle class,” Politico (2024), https://www.politico.com/news/2024/07/26/harris-biden-pledge-not-raise-taxes-middle-class-00171416.
19 Kim Yoo Jang LLP, “Navigating the political landscape: Kamala Harris’s tax policies,” Kim Yoo Jang LLP (2024), http://www.kyjcpa.com/news-updates/navigating-the-political-landscape-kamala-harriss-tax-policies/.
20 Tax Cuts and Jobs Act, Pub. L. No. 115-97, 131 Stat. 2054 (2017), https://www.congress.gov/115/statute/STATUTE-131/STATUTE-131-Pg2054.pdf.
21 Authors’ estimates on the distributional effects of the expiration of the TCJA. Estimates were determined using a proprietary microeconomic formulation constructed in the Policy Simulation Library’s open source Tax-Calculator model, release 4.2.1.
22 Garrett Watson and Erica York, “Tax calculator: How the TCJA’s expiration will affect you,” Tax Foundation (2024), https://taxfoundation.org/data/all/federal/tax-calculator-tcja-expiration/.
23 Authors’ estimates on the distributional effects of the expiration of the TCJA. Estimates were determined using a proprietary microeconomic formulation constructed in the Policy Simulation Library’s open source Tax-Calculator model, release 4.2.1.
24 Authors’ estimates on the distributional effects of the expiration of the TCJA. Estimates were determined using a proprietary microeconomic formulation constructed in the Policy Simulation Library’s open source Tax-Calculator model, release 4.2.1.
25 Higher-end projections based on the authors’ estimates on the budgetary effects of the expiration of the TCJA over the ten-year window. Estimates were determined using a proprietary microeconomic formulation constructed in the Policy Simulation Library’s open source Tax-Calculator model, release 4.2.1.
26 Congressional Budget Office, “Budgetary outcomes under alternative assumptions about spending and revenues,” U.S. Congress (2024), https://www.cbo.gov/system/files/2024-05/60114-Budgetary-Outcomes.pdf.
27 Impacts on full-time employment were calculated by taking the ratio of the CBO’s estimate of baseline wages and salaries divided by the BLS’s estimate of the average wage rate, multiplied by the CBO’s estimate of elasticity with respect to after-tax wages and further multiplied by a logarithmic value of marginal tax rates imputed from the expiration of the TCJA. Estimates were determined using a proprietary microeconomic formulation constructed in the Policy Simulation Library’s open source Tax-Calculator model, release 4.2.1.
28 Gloria Guzman and Melissa Kollar, “Income in the United States: 2022,” United States Census Bureau (2023), https://www.census.gov/library/publications/2023/demo/p60-279.html.
29 Garrett Watson and Erica York, “Tax Calculator: How the TCJA’s expiration will affect you,” Tax Foundation (2024), https://taxfoundation.org/data/all/federal/tax-calculator-tcja-expiration/.
30 Gloria Guzman and Melissa Kollar, “Income in the United States: 2022,” United States Census Bureau (2023), https://www.census.gov/library/publications/2023/demo/p60-279.html.
31 Garrett Watson and Erica York, “Tax Calculator: How the TCJA’s expiration will affect you,” Tax Foundation (2024), https://taxfoundation.org/data/all/federal/tax-calculator-tcja-expiration/.
32 Niccole Harris, “Here’s how many diapers your baby really needs,” Parents (2023), https://www.parents.com/parenting/money/saving/save-money-and-build-a-diaper-stockpile/.
33 Garrett Watson and Erica York, “Tax Calculator: How the TCJA’s expiration will affect you,” Tax Foundation (2024), https://taxfoundation.org/data/all/federal/tax-calculator-tcja-expiration/.
34 Ibid.
35 Michael Lee, “Flashback: Harris proposed middle class tax increase for ‘Sanders-lite’ health care plan,” Fox News (2024), https://www.foxnews.com/politics/flashback-harris-proposed-middle-class-tax-increase-sanders-lite-health-care-plan.
36 Andrew Lisa, “What a Harris presidency could mean for the wealthy,” Yahoo! Finance (2024), https://finance.yahoo.com/news/harris-presidency-could-mean-wealthy-110224571.html.
37 PK, “Household income percentile calculator for the United States,” DQYDJ (2023), https://dqydj.com/household-income-percentile-calculator/.
38 Erica York and Garret Watson, “Where does Kamala Harris stand on taxes?,” Tax Foundation (2024), https://taxfoundation.org/blog/kamala-harris-tax-proposals-2024/.
39 Ibid.
40 Ibid.
41 Benjy Sarlin, “Kamala Harris unveils $315 billion plan to boost teacher pay,” NBC News (2019), https://www.nbcnews.com/politics/2020-election/kamala-harris-unveils-315-billion-plan-boost-teacher-pay-n987171.
42 Sarah Foster, “How could a Harris presidency impact your finances? Her record offers some clues—and diverges some from Biden,” Bankrate (2024), https://www.bankrate.com/personal-finance/biden-versus-harris-economic-policies/.
43 Mike Palicz, “$5 trillion list of tax hikes Kamala Harris just endorsed,” Americans for Tax Reform (2024), https://www.atr.org/5-trillion-list-of-tax-hikes-kamala-harris-just-endorsed/.
44 John Kartch, “Kamala admits her carbon tax may hit consumers, “But that should never be the reason not to actually put a fee in.,” Americans for Tax Reform (2024), https://www.atr.org/kamala-admits-her-carbon-tax-may-hit-consumers-but-that-should-never-be-the-reason-not-to-actually-put-a-fee-in/.
45 Erica York and Garrett Watson, “Where does Kamala Harris stand on taxes?,” Tax Foundation (2024), https://taxfoundation.org/blog/kamala-harris-tax-proposals-2024/.
46 Sahil Kapur, “Harris proposes raising the corporate tax rate to 28%, rolling back a Trump law,” NBC News (2024), https://www.nbcnews.com/politics/2024-election/harris-proposes-raising-corporate-tax-rate-28-rolling-back-trump-law-rcna167208.
47 Mike Palicz, “Kamala Harris wants to impose a national wealth tax,” Americans for Tax Reform (2024), https://www.atr.org/kamala-harris-wants-to-impose-a-national-wealth-tax/.
48 Andrew Duehren, “What we know about Kamala Harris’s $5 trillion tax plan so far,” The New York Times (2024), https://www.nytimes.com/2024/08/22/us/politics/kamala-harris-tax-plan.html.
49 Mike Palicz, “Kamala Harris wants to impose a national wealth tax,” Americans for Tax Reform (2024), https://www.atr.org/kamala-harris-wants-to-impose-a-national-wealth-tax/.
50 Reports, “IRS audits few millionaires but targeted many low-income families in FY 2022,” TRAC IRS (2023), https://trac.syr.edu/reports/706/.
51 Alexander Rifaat and Cady Stanton, “Walz aligns with Harris on tax policy objectives,” Tax Notes (2024), https://www.taxnotes.com/featured-news/walz-aligns-harris-tax-policy-objectives/2024/08/06/7kknk.
52 Patrick Gleason, “Kamala Harris is more in sync on taxes with Tim Walz than Josh Shapiro,” Forbes (2024), https://www.forbes.com/sites/patrickgleason/2024/08/06/kamala-harris-is-more-in-sync-with-tim-walz-on-taxes-than-josh-shapiro/.
53 Ibid.
54 Fox News, “Minnesota’s forecasted budget surplus is at $17.5 billion, represents improvement in state’s fiscal picture,” Fox News (2023), https://www.foxnews.com/us/minnesotas-forecasted-budget-surplus-17-5-billion-represents-improvement-states-fiscal-picture.
55 Marth Njolomole, “Where Minnesota’s $17.5 billion surplus went: A series,” American Experiment (2023), https://www.americanexperiment.org/where-minnesotas-17-5-billion-surplus-went-a-series/.
56 Mike Cook, “Tax increases on wealthiest, budget reserves key pieces of Walz’s budget proposal,” Minnesota House of Representatives (2021), https://www.house.mn.gov/SessionDaily/Story/15504.
57 https://www.americanexperiment.org/where-minnesotas-17-5-billion-surplus-went-a-series/
58 Rob Hubbard, “Minnesota’s projected budget surplus balloons to $3.7 billion, but fiscal pressure still looms,” Minnesota House of Representatives (2024), https://www.house.mn.gov/SessionDaily/Story/18109.
59 Evan Ramstad, “Minnesota’s 30% budget jump is spend-it-while-you-can thinking,” The Minnesota Start Tribune (2023), https://www.startribune.com/ramstad-minnesotas-state-budget-is-jumping-30-percent-reflecting-last-years-taxes/600263746.
60 Rob Hubbard, “Minnesota’s projected budget surplus balloons to $3.7 billion, but fiscal pressure still looms,” Minnesota House of Representatives (2024), https://www.house.mn.gov/SessionDaily/Story/18109.
61 Jared Walczak, “Gov. Tim Walz raised taxes as most governors cut them,” Tax Foundation (2024), https://taxfoundation.org/blog/tim-walz-tax-policies/.
62 Minnesota Department of Revenue, “Motor vehicle sales,” Minnesota Department of Revenue (2024), https://www.revenue.state.mn.us/book/export/html/19231.
63 Jared Walczak, “Gov. Tim Walz raised taxes as most governors cut them,” Tax Foundation (2024), https://taxfoundation.org/blog/tim-walz-tax-policies/.
64 Brian Schwartz, “Inside the tax battles Tim Walz fought – and won – in Minnesota,” CNBC (2024), https://www.cnbc.com/2024/08/13/tim-walz-kamala-harris-minnesota-business.html.
65 Jared Walczak, “Gov. Tim Walz raised taxes as most governors cut them,” Tax Foundation (2024), https://taxfoundation.org/blog/tim-walz-tax-policies/.
66 Ibid.
67 Chris Edwards and Ilana Blumsack, “Fiscal policy report card on America’s governors 2022,” Cato Institute (2022), https://www.cato.org/white-paper/fiscal-policy-report-card-americas-governors-2022#kansas-montana.
68 Thomas Catenacci, “Tim Walz pushed a 70 percent gas tax hike—then called for a federal gas tax pause,” The Washington Free Beacon (2024), https://freebeacon.com/elections/tim-walz-pushed-a-70-percent-gas-tax-hike-then-called-for-a-federal-gas-tax-pause/.
69 Adam A. Millsap, “Governor Walz has overseen a weak economy in Minnesota,” Forbes (2024), https://www.forbes.com/sites/adammillsap/2024/08/06/governor-walz-has-overseen-a-weak-economy-in-minnesota/.
70 Ibid.
71 Ibid.
72 U.S. Bureau of Labor Statistics, “12-month percentage change, consumer price index, selected categories,” United States Department of Labor (2024), https://www.bls.gov/charts/consumer-price-index/consumer-price-index-by-category-line-chart.htm.
