Presidential campaigns and tax policy: nothing is certain, much is at stake

Following a 10 September Presidential debate in which tax policy was only briefly addressed (there was a mention of expanding the child tax credit and increasing the deduction for start-up business expenses), things have become interesting. 

In the past couple of weeks, the candidates have talked about eliminating taxes on tips, increasing the corporate tax rate, bolstering tariffs (some of which have the potential to reduce other tax receipts), removing the state and local tax (SALT) deduction limit and reducing taxes on Social Security benefits and overtime pay. For indirect tax leaders trying to get a read on how the election’s outcome might affect their tax liabilities and compliance activities, it can be difficult to distinguish sound tax policy stances from political sound bites. Yet, is important to do so: BDO’s 2024 Tax Strategist Survey finds that 86% of tax leaders believe these types of tax policy shifts will pose a significant challenge to their organisations.  

Fortunately, both candidates have released more information concerning their approaches to tax policy. This Tax Foundation article compares the candidates’ stances on taxes. A separate Tax Foundation landing page, under the header Tracking 2024 Presidential Tax Plans, is also helpful. The Tax Policy Center covers similar material while organising its articles on the candidate’s tax policy proposals under a ‘Presidential campaign proposals’ tag. These summaries review the candidates’ proposals on various tax topics, including corporate income tax rates, capital gains and dividends, credits and deductions, estate and wealth taxes, excise taxes, individual income taxes, payroll taxes and tariffs and trade policies. 

As you assess tax policy difference between the candidates, I encourage you to look at the corporate tax rate. According to the Tax Foundation, Vice President Kamala Harris has proposed increasing the current rate of 21% to 28% while former President Donald Trump has proposed decreasing it (either to 15% or 20%).  

Prior to the passage of the U.S. Tax Cuts and Job Act (TCJA) in 2017, the U.S. had one of the highest corporate tax rates globally. The reduction from 35% to 21% aimed to encourage U.S.-based manufacturing, benefitting both U.S. multinationals and foreign companies with significant U.S. markets, such as those in the automotive industry. 

Proposals to increase the corporate tax rate from 21% to a higher rate could potentially lead to companies moving manufacturing outside the U.S., which might have an impact on job growth and investment. Additionally, higher corporate tax rates could be indirectly borne by consumers through increased prices, lower wages and reduced valuations of corporate equities. 

Obviously, there is a lot at stake on 5 November. We’ll keep you posted leading up to the election and after it’s been decided.