Trump, Harris Caught In Tax Cut One-Upmanship — Meanwhile, US Debt Is 22% Larger Than GDP

With less than three months left before the 2024 presidential election, tax policy is one topic that could sway voters in their choice between Democrat Kamala Harris and Republican Donald Trump.

After all, the country's economy remains a central concern for the electorate. Each presidential ticket is hustling to one-up the other on tax proposals they hope will appease voters, despite the national fiscal deficit reaching concerning levels.

What Happened: In March, when President Joe Biden was still running for re-election, he released the budget for the upcoming fiscal year, which begins in October. In it, his administration proposed raising the child tax credit cap from $2,000 to $3,000 per child under 17 and up to $3,600 per child under the age of 6, according to a Missouri Independent report.

U.S. Sen. JD Vance, Trump’s running mate, recently proposed a $5,000 per child credit.

Vance’s plan came on the heels of widespread criticism he received over denigrating remarks made against women without children.

About 40 million families are beneficiaries today of the Child Tax Credit, a policy created in the 1990s with the goal of ending child poverty in the U.S.

Households with yearly incomes under $400,000 or individuals with incomes under $200,000 can claim the full credit. Up to $1,700 can be refunded if the applicant doesn't have tax obligations to cancel with the credit. 

The current $2,000 ceiling on the child tax credit is part of a series of credits from 2017 by the Trump administration. These will expire in 2025 if not extended, taking the child tax credit back to its original $1,000 cap.

A bill introduced this week with bipartisan support would raise the child tax credit to $4,000.

Earlier this month, however, Vance’s fellow Republican senators blocked a $78-billion bill that would have retroactively expanded the child tax credits for the 2023 season.

Vance was absent from the vote.

Also Read: Harris Vs. Trump: Expert Says S&P 500 Trends Could Predict 2024 Presidential Election Outcome

Why It Matters: Vance’s proposal would cost the government an extra $2 trillion over the next decade and up to $3 trillion if the credit is refundable, Accounting Today reported.

The extra budgetary weight comes as government officials argue over whether U.S. debt has become unsustainable, with interest payments costing the country $2 million per minute.

Current obligations owed by the U.S. are 22% more than the country's entire economic output or GDP, according to Fed data.

Both political parties are also pitching tax policy ideas to win over voters in key battleground states.

Trump, for example, proposes eliminating taxes on senior benefits. Recall how voters over 65 favored Trump by 5% in the 2020 election. Recent polls show he's losing that demographic to Harris, per Accounting Today.

Another Trump plan is to remove taxes on Social Security benefits entirely, which could come at the cost of deepening the deficit by $1.8 trillion.

Trump has also vowed to extend his 2017 tax cuts, a move that would add $4.6 trillion to the deficit and raise U.S. debt to 200% of GDP by 2054.

What’s Next: Harris is expected to unveil details of her economic plan in a speech in North Carolina on Friday. Among the items she’s likely to address: Lowering grocery costs by proposing a law that bans corporate price gouging and removing taxes on tipped income if elected president.

Trump has also proposed eliminating taxes on tips, and promptly denounced Harris as “Copy Cat Kamala Harris.”

Regardless of the presidential will, enacting such a change would require legislation and the future administration would have to work with Congress to win its approval.

Now Read: 

• Trump’s Potential Economic Team Is ‘Least Impressive’ In History, Says Economist Justin Wolfers: He Will ‘Make Up Policy On The Fly’

Shutterstock images.