US candidates lure US voters with promise of tax cuts

In just over two months, voters in the United States will elect a new president. A new “leader of the free world,” who, in addition to various global geopolitical challenges, will also have to deal with unprecedented domestic economic hardships. Election fever is at its peak, and so are the promises made by both parties. Both Democratic presidential candidate Kamala Harris and her Republican counterpart Donald Trump have pulled out all the stops, not only to entice undecided voters, but also to convert voters from opposing camps.

Harris, the Democratic U.S. presidential candidate, has said she will announce a tax credit for small business startups next week. During a market tour in Savannah, Georgia, she made clear her focus is on the small business community. “Half of the American workforce owns, runs or works in a small business,” she said, adding that strengthening the economy could not happen without the participation of small businesses.

Harris had previously said that if she came to power, her administration would implement a tax cut for the middle class. During a speech at the Democratic National Convention in Chicago, the US Vice President accused her opponent Donald Trump of working against the middle class. “Trump is fighting for himself and his billionaire friends and he’s going to give them another round of tax breaks that will add $5 trillion to the national debt,” she said from the podium at the convention. Harris claimed that Trump would implement a “national sales tax” that would increase the burden on middle-class families by almost $4,000 a year. “Now, instead of a Trump tax increase, we’re going to implement a middle-class tax cut that will benefit over 100 million Americans,” Harris said.

Donald Trump, on the other hand, has targeted his tax agenda at the wealthy and the industrial sector. In his previous term as US president, Trump cut the corporate tax rate from 35 percent to 21 percent. He has promised to cut it further to 15 percent if re-elected. Kamala Harris has said she will raise it to 28 percent.

Trump is also playing the Make America Great Again (MAGA) card and has promised a big tariff increase on imported goods. He says this will reduce the import bill and help domestic producers. He plans a basic 10 percent tariff. On Chinese imports, this tariff could rise to 60 percent.

The tax cut promises come as Americans face a “tax shock” in 16 months.

The Tax Cuts & Jobs Act (TCJA) passed by the Trump administration in 2017 cut taxes for both individuals and industry. While individuals and families were gifted with lower tax rates and a doubling of the standard deduction, among other benefits, industry saw a huge tax cut.

Some of these lower tax obligations run until 2026. Several U.S. policymakers are opposed to extending many of these reliefs, which they say will add an estimated $4.6 trillion to the U.S. budget deficit over the next decade.

An interesting side note to this tax war is the effort to appeal to young people, with both parties promising tax breaks for the gig economy. Both Trump and Harris have announced that they will eliminate taxes on tips they receive for various services. As Trump announced on Thursday: “To provide greater relief to working-class people and seniors on fixed incomes, we will not tax tips and we will not tax Social Security.”