NORTH HAMPTON, N.H. — Vice President Kamala Harris on Wednesday sought to put daylight between herself and President Joe Biden on tax policy, making it the first issue on which she is trying to stand apart from an administration in which she holds a key role.
Stepping up her efforts to win over the business community, Harris announced that she would increase the capital gains tax at a far lower rate than what Biden had proposed — a move that came after pressure from her campaign’s biggest donors to back off some of its most aggressive tax proposals.
Harris’ proposal, which she introduced at a campaign event in New Hampshire, was directed squarely at business owners and wealthier Americans who are skeptical of Democrats and have gravitated toward former President Donald Trump. In the same speech, she rolled out her new plan for an expanded tax break for startups.
Biden had proposed taxing capital gains at 39.6% for Americans who make more than $1 million a year. Harris said Wednesday that she would tax investment income for those Americans at a rate of 28%, a reversal from her earlier support for the tax increases included in the White House budget released this spring.
“If you earn a million dollars a year or more, the tax rate on your long-term capital gains will be 28% under my plan,” Harris said at a brewery in North Hampton, New Hampshire. “Because we know when the government encourages investment, it leads to broad-based economic growth and it creates jobs, which makes our economy stronger.”
Harris’ proposed rate of 28% does not include an additional surtax on investment income, according to two people familiar with the campaign’s proposal. One of those people said a 5% surtax would apply on top of the 28%, bringing the total rate to 33%. With the surtax, Biden’s proposal would have raised the top capital-gains rate to 44.6%. The top capital-gains tax rate now is 23.8%, inclusive of a 3.8% surtax.
The ideas follow what had been an effort by Harris to coast largely on Biden’s agenda during the opening weeks of her campaign. She had sought to take credit for what she says are his successes while offering an array of plans to combat higher prices and inflation, problems that voters have tended to hold Biden at least partly responsible for. That has led to an awkward dance of embracing the unpopular president and his policies even as she tries to run as a change candidate.
In addition to her policy shift, Harris tiptoed away from the language Biden had used during his reelection campaign, arguing that she was running not only to block Trump from returning to office but to usher in an agenda that would excite her voters.
“When we say fight, it is a fight for something, not against something,” she said. “That’s what we’re talking about when we talk about a new way forward. This is for something.”
While she has raised more than $540 million since Biden ended his campaign and endorsed her, Harris and some of her top aides have faced pressure from wealthy donors to abandon some of the president’s most ambitious ideas for taxing the rich, including a proposal to raise a novel tax on Americans worth at least $100 million, The New York Times has reported.
Many of the wealthiest people in America derive their riches from the stocks, bonds and other assets they own, meaning they would disproportionately benefit from lower proposed taxes on investment income, which is generally taxed at a lower rate than regular income like wages. Biden’s ideas already faced skepticism on Capitol Hill and were unlikely to become law.
Harris has sought to present herself as an ally to businesses and investors in a way that Biden did not. That has meant courting donors from Wall Street as well as Silicon Valley, which Harris once represented as a senator from California, and embracing some of the language and policy ideas favored by businesses.
“My plan will make the tax code more fair while prioritizing investment and innovation,” she said in New Hampshire. “Billionaires and big corporations must pay their fair share in taxes.”
Sen. Jeanne Shaheen, D-N.H., who spoke at the event, said Harris had revitalized her party’s efforts to defeat Trump in part by being “her own candidate.”
“She made it very clear her support for President Biden, what she thinks about him as a leader, a transformational president, but she’s going to have her own agenda, as she should,” Shaheen said in an interview Wednesday. “She’s got a vision for America and she’s now beginning to articulate that in a way that Americans can see how she would lead versus how President Biden has led.”
Harris spoke to a crowd of about 3,000 people from behind bulletproof glass at an outdoor rally in New Hampshire’s Seacoast region, the most Democratic corner of the state. The banner hanging over the stage read “Opportunity Economy,” a phrase the vice president has used to describe her vision for policies intended to support the middle class.
The visit to New Hampshire was Harris’ first as the Democratic presidential nominee, an indication her team views the Granite State’s four electoral votes as competitive even though the state is widely considered safer Democratic territory than the larger political battlegrounds that have attracted far more attention this summer.
While Harris cast the expanded deduction for startup companies as a way to drive economic growth, tax experts said the proposed policy was ultimately a modest change. Under current law, companies can deduct $5,000 of startup costs immediately and then write off other qualifying expenses over 15 years. Harris’ plan would essentially speed up a company’s ability to deduct its startup costs.
“It’s a question of timing,” said Garrett Watson, a senior policy analyst at the Tax Foundation, a think tank in Washington that tends to support lower taxes. “Instead of having it immediately, you have to do a chunk of it over that 15-year period of time.”
That could help new businesses, but Watson said the biggest tax benefit of the change would go to new companies that do not stay in business long enough to deduct all of their startup expenses over 15 years. (Many startups fail.) The size of the tax break would be relatively small, most likely around $20 billion over 10 years, experts estimated, and the impact on overall economic growth could be small.
“It’s a good talking point, but startup businesses, they only account for a portion of economic activity, so I don’t anticipate this having much impact on the economy overall,” said Kyle Pomerleau, a senior fellow at the right-leaning American Enterprise Institute. “It’s a good thing but a small thing.”
Politically, focusing on small companies is a way for Harris to present a business-friendly agenda while still drawing a contrast with Trump. He has suggested that he would cut the corporate tax rate, which generally applies to larger companies, to as low as 15%, from 21%. Harris’ campaign has said she would raise the corporate tax rate to 28%, while also proposing Wednesday to reduce regulations for small businesses and support their expansion.
Overall, though, both Harris and Trump have focused on cutting taxes on the campaign trail. Trump has said he wants to end taxes on Social Security benefits and taxes on tips, a proposal that Harris ultimately endorsed, while she has called for expanding the child tax credit, among other steps. The two candidates both want to extend tax cuts Trump signed into law in 2017, with Harris pledging to not increase taxes for any household making less than $400,000 a year.
New Hampshire made a natural spot for Harris’ announcement. Nearly half the workers in the state are employed by small businesses, the highest percentage in the battleground states, according to statistics collected by the Small Business Administration. And it has a sizable contingent of swing voters.
Biden had built a robust campaign operation in New Hampshire before his miserable debate night against Trump in June led him to drop out. But Harris’ takeover of the ticket has brought the state back into the column of likely Democratic victories, polls show.
Trump has not held a rally in New Hampshire since before the Republican primary election in January. On Wednesday, he tried to offer competition to Harris’ appearance by calling into a local morning radio show. The former president said he planned to campaign in the state again before the election.
Karoline Leavitt, a spokesperson for the Trump campaign, said Harris and Biden had “been a disaster for New Hampshire’s small-business community.”
“New Hampshire’s small businesses are the backbone of our state’s economy,” Leavitt said. “Small-business owners and workers are struggling to keep up with the increased cost of living in our state. Kamala’s words today ring hollow. Her record speaks volumes.”
This article originally appeared in The New York Times.
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