Harris' economic policy conveys a positive mood, but lacks details, experts say

Democratic presidential candidate Kamala Harris unveiled some major economic plans for the first time on Friday, but experts had mixed reactions when asked to what extent some of these plans would really help Americans.

Harris said in a fact sheet that she is focusing on “some of the biggest pain points facing American families.” She plans to ease rent increases, cap prescription drug prices for everyone, increase the number of first-time home buyers, end gouging in food prices and strengthen the child tax credit.

Many of these plans appeal to voters who have suffered from rising inflation in recent years. But some experts are skeptical about the so-called “price controls” intended to combat high prices and how she plans to finance some of her proposals. Any changes to the tax law would also require congressional approval and depend heavily on which party holds the majority in the House and Senate, tax experts say.

“It is optimistic and aimed at helping the middle class. However, the details are still pending and it is unclear what impact the congressional elections will have on the likelihood of passage,” said Mark Baran, managing director of the National Tax Office at consulting firm CBIZ MHM.

Rick Lazio, a former Republican congressman from New York and senior vice president of tax consulting firm Alliantgroup, wrote in an email that Harris’ campaign team must consider “the societal costs of unsustainably higher national debt and its impact on inflation, as well as the ability to respond to unplanned events such as recessions, wars, pandemics and natural disasters.”

The bipartisan Committee for a Responsible Federal Budget estimates that her overall plan would increase budget deficits by $1.7 trillion over 10 years, rising to $2 trillion if the temporary housing policy was made permanent. “The Harris campaign has said this would be funded by taxes on corporations and top earners and that she supports the revenue increases in the president’s fiscal year 2025 budget, but has not proposed any specific countermeasures as part of her agenda to reduce costs for American families,” it said in a press release.

To get a better idea of what the experts liked and what they questioned, USA Today put together a more detailed look at each proposal.

Child allowance

A return to the COVID-era Child Tax Credit (CTC), which was $3,600 for qualifying children under 6 and $3,000 for other qualifying children under 18.

The CTC is currently $2,000 per qualifying child under 17, and will be phased out for singles earning over $200,000 and married couples earning over $400,000. Republican vice presidential candidate JD Vance has floated a $5,000 CTC and indicated there would be no income limits.

New, expanded tax credit of up to $6,000 for families with a newborn.

“We were absolutely thrilled when she proposed this big expansion,” said Mary Nugent, domestic policy adviser at the nonprofit Save the Children US. “To bring it front and center and include this new kind of bonus for young parents with the youngest children is really exciting in terms of the impact.”

The plan would reduce child poverty by at least half, she estimates. “Most families would receive a larger loan and the bottom line would be a massive reduction in child poverty.”

Health care and food prices

For Medicare beneficiaries, the price cap on insulin is $35 to cover the $2,000 annual out-of-pocket cost for all Americans, not just seniors.
Stricter regulations and strict antitrust enforcement are intended to prevent higher pharmaceutical and food costs for consumers.
First nationwide ban on price gouging on food and groceries.

Groundwork Collaborative, a nonprofit progressive advocacy group, praised Harris’ push to hold companies accountable. “When just a handful of large companies control most of the market, or even control the market in a single region, they have the power to raise prices without fear of a competitor nipping at their heels,” Lindsay Owens, the group’s executive director, said in a statement.

Economists were less enthusiastic, calling Harris’ efforts “price controls.”

“Harris continues the Biden administration’s theme of blaming high inflation on corporate greed and price gouging – be it oil producers, pharmaceutical companies or, in this case, grocers – rather than overly loose pandemic-era fiscal and monetary policy,” Paul Ashworth, chief North American economist at research firm Capital Economics, wrote in a note. “She wants Congress to pass a federal ban on ‘price gouging.’ That sounds uncomfortably like price controls that could lead to product shortages.”

Housing

Stop data companies from raising their rents and stop Wall Street investors from buying up large quantities of homes to resell at a premium.
New tax incentives for builders who build “starter homes.”
Offer first-time home buyers a down payment of up to $25,000.

“I am encouraged that Vice President Harris recognizes the affordable housing crisis in America,” Lazio said. “There is not a congressional district in the country where the housing supply imbalance has not increased. However, the devil is in the details, and some of the initiatives, such as subsidies for first-time buyers regardless of their wealth or income, need to be reconsidered.”

Ashworth also noted that many developed countries around the world “have tried to boost housing construction but have struggled to meet their targets due to capacity constraints in the construction industry or other bottlenecks such as zoning regulations.”

Tax-free tips: Trump and Harris agree on one thing: No taxes on tips. This is how it could affect the budget

What was not discussed?

The Tax Cuts and Jobs Act, which expires at the end of 2025, is a massive tax package passed in 2017 that includes provisions that affect nearly every American. When it expires, tax rates will rise for most Americans, income brackets will become narrower, and the standard deduction would be cut in half, which could force many Americans to itemize again, among other things.

That’s the “big elephant in the room,” Baran said. “The complete expiration of the law will hurt the American middle class because tax rates will rise.”

Ashworth also noted that there was no discussion about “whether she would support an extension of the original Trump tax cuts, even for those making less than $400,000 a year. The potential budget chasm that could occur late next year is the real political battleground.”

This is “bad economic policy, but understandable from a political perspective, as it could be enough to win the election in Nevada,” Ashworth said. “Assuming there are limits on the amount of income that can be counted as tips, and if only the income tax is eliminated but not the payroll tax, this tax cut could cost as much as $150 billion over the next decade.”

Small and medium-sized enterprises.

“I am disappointed that there was no discussion today about the need to protect and promote these companies that employ half of all Americans and, until recently, generated the majority of industry innovation in America,” Lazio said. He said he would like to see Harris support tax incentives for research and development to spur innovation and keep tax rates stable for small businesses.

“Small business owners are also part of the middle class,” said Baran.

Medora Lee is a finance, markets and financial reporter for USA TODAY. Reach her at [email protected] and subscribe to our free Daily Money newsletter, which provides financial tips and business news every Monday through Friday morning.