Vice President Kamala Harris recently unveiled a new proposal for small business tax breaks as part of her economic platform. The plan includes increasing the tax deduction for startup costs from $5,000 to $50,000. The goal is to attract 25 million new small business applications in a potential first term, an increase from the 19 million under the current Biden administration.
While the plan may help stimulate economic activity, experts warn that it would also add billions to the deficit over the next decade. The proposals would require congressional approval, and the Trump campaign argues that it would drive up national debt. Former President Donald Trump has campaigned on cuts to the corporate tax rate and extending his 2017 tax cuts.
Harris describes the plan as part of her efforts to build an “opportunity economy.” The current tax deduction for a startup is just $5,000, which she believes is a financial barrier for many entrepreneurs. The proposal would allow new startups to spread the deduction over several years or defer claiming it until the company becomes profitable.
Under the current law, companies can deduct up to $5,000 of their qualifying start-up costs. However, the deduction starts to phase out if business expenses exceed a certain amount. Raising the threshold to $50,000 would benefit a lot more businesses with startup costs in the $10,000 to $80,000 range.
Garrett Watson, a senior policy analyst at the Tax Foundation, estimates that the proposal may cost the federal government approximately $20 billion over 10 years. While the size of the plan is smaller than some of Harris’s other proposals, it reflects her interest in continuing the growth in startup business activity seen in recent years.
Despite potential concerns about the cost, experts don’t expect strong political opposition to the proposal. It benefits small businesses and is structured in a way that doesn’t permanently reduce the federal government’s revenue base. Many of the changes Harris is proposing would require congressional approval, and her previous economic package was projected to add $1.7 trillion to the deficit over the next decade before interest.
Harris’s economic plan includes other measures such as a Child Tax Credit plan, a federal ban on price gouging, housing subsidies for first-time buyers, and a plan to build 3 million affordable homes by the end of her first term. She also hopes to expand on President Joe Biden’s efforts to bring down prescription drug costs.
While focusing on small businesses may be politically advantageous, as voters generally associate Republicans with being better at handling the economy, it can also be seen as working on Republican turf. By championing small businesses, Harris is entering a space traditionally associated with Republicans. However, it doesn’t mean she should avoid talking about the other party’s issues entirely, but rather not make them the central focus.
In conclusion, Vice President Kamala Harris’s proposal for small business tax breaks aims to stimulate economic activity and reduce financial barriers for entrepreneurs. While it may add to the deficit, experts believe it is a relatively low-cost plan that could have bipartisan support. Harris’s broader economic agenda includes various measures to support small businesses, reduce prescription drug costs, and provide affordable housing. However, as she focuses on small businesses, she enters a space typically associated with Republicans, which can be both politically advantageous and challenging.
