#1 Corporate income tax rate: mostly diverge
The 21% corporate income tax rate does not expire; however, Democrats and some Republicans support raising the rate.
Where they diverge
Former President Donald Trump would like to reduce the corporate income tax rate to 15%, but only for companies that make their products in America.
Vice President Kamala Harris is seeking a 28% corporate income tax rate, which was proposed by both the Biden and Obama administrations. That change would raise $1.35t over 10 years, according to the most recent Treasury Department revenue estimate.
Where they converge
In a break from the past, some House Republicans have expressed support for increasing the corporate income tax rate to cover the cost of other extensions, such as the TCJA provisions. A rate somewhere between 21% and 28% could represent a compromise between the two parties.
#2 Sources of revenue: mostly diverge
The corporate income tax rate is the most high-profile issue in the broader debate over whether TCJA provision extensions should be matched with revenue offsets, but other tax proposals could be considered. Democrats, and even some House Republicans, have indicated that tax cuts should be paid for — they just differ on who should pay.
Where they diverge
Trump and influential Senate Republicans assert that the cost of extending the existing TCJA provisions does not need to be offset because of the economic growth effects of tax cuts.
Harris is focused on using tax increases to pay for Democratic policy priorities. Democrats have sought to increase taxes on corporations and high-income individuals for years and have a broad playbook to turn to in past budgets and proposed legislation. In addition to raising the corporate income tax rate, she has put the following on the table:
- Increasing the corporate alternative minimum tax (CAMT) from 15% to 21%
- Increasing the stock buyback excise tax from 1% to 4%
- Reinstating the top marginal tax rate of 39.6%
- Imposing a 25% billionaires’ tax on total income, including unrealized capital gains, for taxpayers with wealth exceeding $100m
- Applying the net investment income tax (NIIT) to pass-through business income of high-income taxpayers, and increasing the NIIT and additional Medicare tax rate to 5%
- Taxing long-term capital gains and qualified dividends of taxpayers with taxable income of more than $1m at 28%
- Modifying the rules for stepped-up basis: the donor or deceased owner of an appreciated asset would realize a capital gain at the time of the transfer (with $5m exclusion)
Where they converge
Several House Republicans, concerned about the growing US deficit, are open to finding sources of revenue to offset the cost of tax policy changes.
#3 Expiring TCJA provisions: mostly diverge
Both Trump and Harris have made US economic growth a central message of their campaigns. Each has said they would use tax cuts and incentives for individuals to help grow and strengthen the US economy. Where they differ is on who would benefit from these proposals, which affects how they would approach the expiring TCJA provisions, including specific expiring provisions that have been controversial, such as the $10,000 cap on the deduction for state and local taxes.
Where they diverge
Harris has framed her approach as a plan for an “opportunity economy,” focused on bolstering the lower and middle classes and investing in small businesses. She has embraced the Biden administration’s pledge not to raise taxes on those making less than $400,000, and in her Democratic National Convention speech, she called for a middle-class tax cut. Her proposals aim to provide new and expanded credits to families, small business startups and first-time homebuyers, paid for with increases on high-net-worth individuals and corporations (which presumably includes allowing the doubled estate tax exemption under the TCJA to expire at the end of 2025).
Trump has focused his messaging on growing the US economy. He would extend the TCJA provisions without revenue offsets, projecting that the economic growth from extending the tax cuts will cover their cost.
He has reportedly expressed interest in a new middle-class tax cut (possibly through a payroll tax cut), an increase in the standard deduction or a rate cut. He has also indicated that he would exempt seniors from paying tax on Social Security and end taxes on overtime pay.
Where they converge
Both candidates have expressed support for expanding the child tax credit and providing tax relief for tip income. Each has also expressed interest in providing the middle class with a tax cut (including, in the case of Harris, extending the expiring TCJA provisions for those with less than $400,000 in income).
Democrats have also expressed support for rolling back TCJA changes to R&D and interest deductibility that took effect after 2021, and the bonus depreciation phasedown that began after 2022. They would reinstate the state and local (SALT) deduction, something for which Trump has also expressed support.
