2024 Election: Federal, State Tax Proposals

From a tax perspective, the 2024 election comes at an interesting time: Not long before the sunsetting of major tax reform passed in 2017, amid an inflationary period that has only begun to lessen, and on the precipice of economic uncertainty.

Vice President Kamala Harris and former President Donald Trump have put forth their visions of tax policy under their administrations. The president doesn’t change tax law—that’s up to the U.S. Congress—but they wield substantial influence.

Trump’s first administration oversaw the first major tax reform in the 21^st century: The Tax Cuts and Jobs Act of 2017 (TCJA). Many provisions in this consequential legislation that affect individuals and pass-through entities were temporary and will expire at the end of 2025. If new legislation doesn’t pass by the end of next year, tax filing will look a lot like it did in 2017:

• Individual tax rates will return to pre-2018 levels.
• The standard deduction as well as the estate and gift tax exemption will halve.
• The federal deduction of state and local taxes (SALT) will be unlimited, no longer subject to a $10,000 limit.
• The Child Tax Credit will drop from $2,000 to $1,000 per child under 17 years old.
• The qualified business income (QBI) deduction, an up-to-20% deduction of business income available to pass-through entities, will no longer be available.
• Bonus depreciation, a provision available to business entities to deduct a larger portion of capital expenditures in the asset’s first year of service, will continue to phase out completely by the end of 2026.

Of course, the presidential election isn’t the only one in November. Many states have consequential tax measures on the ballot. Let’s review each presidential candidate’s tax policy proposals and the key state tax measures on the ballot in November.

Kamala Harris Tax Policy Proposals

Harris and Minnesota Governor Tim Walz have proposed a tax plan that raises income taxes on individuals earning more than $400,000 per year while increasing taxes on corporations. The plan also provides credits and incentives to parents, wage workers, first-time homebuyers, and new business owners.

Raise Taxes on Individuals Earning More Than $400,000 Per Year

The Harris–Walz campaign has made several proposals that would increase taxes on those earning more than $400,000, including the following:

• Raising the income tax rate to 39.6% for individuals earning more than $400,000 ($450,000 if filing jointly)
• Adding a 28% long-term capital gains tax rate, applying to those earning $1 million or more
• Widening the net investment income tax (NIIT) base to include nonpassive income (such as wages and income from a pass-through business, such as a partnership) and increasing the rate for income above $400,000 from 3.8% to 5%
• Raising the additional Medicare tax rate for income above $400,000 from 0.9% to 5%

Note that these final two proposals addressing the NIIT and additional Medicare tax were not included in the Harris campaign’s official policy statements. Rather, they were proposed in President Joseph Biden’s budget proposal, which Harris has apparently espoused.

Expand the Child Tax Credit

The campaign proposes permanently raising the Child Tax Credit to up to $6,000 per newborn, $3,600 per child 2–5 years old, and $3,000 per child 6 years old through 17 years old.

Through 2025, the Child Tax Credit provides $2,000 per dependent child under 17 years old. After 2025, the credit amount is slated to drop to $1,000 per child.

Reduce Tax Burden for Low- and Some Middle-Income Individuals

The vice president proposes a permanent expansion of the Earned Income Tax Credit, a refundable credit available to low-income individuals, that would primarily improve credit amounts for those without dependent children.

She also suggested expanding the Premium Tax Credit, which reduces the cost of health insurance premiums for eligible taxpayers.

Eliminate Taxes on Tipped Income

The Harris campaign has proposed that Congress get rid of taxes on tips paid to services and hospitality workers.

Add a $25,000 First-Time Home-Buying Grant Program

A hallmark of the campaign’s tax proposals is $25,000 in first-time homebuyer down payment assistance. It’s unclear how exactly the incentive would be structured. Although not included in the campaign’s official platform, reports have suggested an additional $10,000 credit for first-time homebuyers.

Increase the Business Startup Cost Deduction from $5,000 to $50,000

Currently, businesses that spend less than $50,000 on startup costs—advertising, training, market research, and more—can deduct up to $5,000 in the first year, with the remaining amount deductible proportionately over the next 15 years. When startup costs exceed $50,000, the first-year deduction is reduced dollar-for dollar.

The Harris campaign proposes increasing the first-year deduction to $50,000. It’s unclear if restrictions would apply when startup costs exceed a specific amount. 

In recent weeks, Democratic members of the U.S. House of Representatives and the U.S. Senate have introduced bills that would expand the business startup deduction. The details of these proposals have not yet been released.

Increase the Corporate Tax Rate from 21% to 28%

The TCJA eliminated graduated tax rates for corporations, which ranged from 15% to 35% and instituted a flat 21% tax on taxable income. Many provisions of the TCJA expire in 2025 or 2026, but this one is permanent.

Harris wants to keep the federal corporate tax rate flat, the same for all corporations regardless of their taxable income. She proposes raising the rate to 28%.

Raise the Stock Buyback Excise Tax from 1% to 4%

The Harris–Walz proposal suggests increasing the excise tax on corporate stock repurchases from 1% to 4% of the fair market value of the shares repurchased.

Revise Foreign Tax Provisions

The Harris campaign hasn’t directly addressed changes to foreign tax rules. However, Biden’s budget proposal makes substantial changes to current foreign tax rules. First, it proposes raising the tax rate on global intangible low-taxed income (GILTI) from 10.5% to 21% and changing how it’s calculated. Under current tax law, the GILTI rate will increase from 10.5% to 13.125% in 2026.

In addition, the budget proposed repealing the reduced tax rate available on foreign-derived intangible income (FDII); according to the budget, a corporation would pay the typical 21% U.S. corporate income tax rate on FDII. The FDII rate is currently 13.125% but is slated to rise to 16.406% in 2026.

Donald Trump Tax Policy Proposals

Trump and U.S. Senator J.D. Vance have proposed, among other policies, a permanent extension of the TCJA, an elimination of the $10,000 state and local tax (SALT) deduction cap, and other tax incentives for wage workers, first-time homebuyers, and elder care providers.

Make Tax Cuts and Jobs Act Provisions Permanent

The Trump–Vance campaign’s platform includes a proposal to make the following TCJA provisions permanent (most are slated to expire after 2025):

• Increased standard deduction
• Child Tax Credit of $2,000 per child under 17 years old
• Increased estate and gift tax exemption 

Eliminate the SALT cap

Although not in his official playbook, Trump has shared in social media and in interviews that he would seek to eliminate the TCJA’s $10,000 cap on the deduction of SALT while making most, if not all, other TCJA provisions permanent. Put another way, under this proposal, individuals who itemize deductions could deduct an unlimited amount of SALT, as they did before 2018.

Introduce Home-Buying Tax Incentives

Trump wants to promote homeownership through unspecified tax incentives, including support for first-time homebuyers.

Eliminate Taxes on Tipped, Overtime, Social Security Income

The Trump campaign proposed exempting tipped income from taxation for restaurant and hospitality workers and in recent speeches and interviews he has also expressed a desire to eliminate taxation on overtime pay.

He’s also stated that he’d seek to eliminate taxes on Social Security income.

Boost Tax Incentives for At-Home Elder Care

The former president recommends tax credits for at-home elder care to support family caregivers. It seems that these credits would be made available in addition to currently available state Medicaid programs that pay family members or friends to care for eligible people.

Place 10%–20% Tariffs on All U.S. Imports, up to 60% on U.S. Imports from China

To offset tax cuts to U.S. workers and businesses, the Trump campaign proposes imposing tariffs on all U.S. imports, ranging from 10-20% for all importers, and potentially a 60% tariff on all goods imported from China to the U.S. He has proposed even higher tariffs on U.S. imports from Mexico.

State Tax Ballot Measures in 2024

At Smith + Howard, we closely monitor state tax activities. Here’s a selection of the ballot measures we’re watching closely.

Arizona

Arizona voters will decide on a provision that’d allow taxpayers to request a property tax refund when the city or locality doesn’t enforce public nuisance laws, such as illegal camping and loitering.

Georgia

In Georgia, voters will weigh in on whether to increase their state personal property tax exemption from $7,500 to $20,000. Voters in the Peach State will also vote to create a state tax court that’d replace its tax tribunal. The tax court would have broader jurisdiction.

Illinois

Voters in the Land of Lincoln will help state legislators decide whether to pursue an additional 3% income tax on income above $1 million that’d go directly to property tax relief.

North Dakota

A ballot measure in North Dakota asks whether state and local governments can levy taxes based on a home’s assessed value. If voters approve the measure, they’ll abolish property taxes in the state, making it the first state without a property tax.

Oregon

Oregon voters will decide whether to expand its corporate minimum tax by adding an additional 3% tax on sales exceeding $25 million. The tax would distribute the revenue as a rebate to Oregon residents who reside in the state for more than 200 days during the year.

South Dakota

Voters in the same state as Mount Rushmore will decide whether to eliminate sales tax on anything sold for human consumption, such as groceries—except for alcoholic beverages and prepared food.

Washington

Washington State voters must decide whether to repeal the 7% tax on long-term capital gains that exceed $250,000. The state imposed the tax in 2022.

Smith + Howard: Providing Expert Insight on Potential Tax Changes

No matter the result of the November 2024 presidential election, tax change is inevitable. With so many TCJA provisions expiring at the end of 2025, the landscape of federal—and state—tax is likely to look different in just a few months.

On November 14 at 11 a.m. EST, Smith + Howard will host nationally recognized economist Dr. Roger Tutterow who will provide a comprehensive analysis of the economic impact of the federal election. At this free event, you’ll receive insights into what you need to know and consider as a business owner or individual navigating these uncertain times. Register today.