Insights and market perspectives
Author: Greg Valliere
29 August 2024
Fears are growing among wealthy Americans that a Kamala Harris administration is likely to impose massive new taxes — including a “wealth tax.” But that’s not the consensus on Capitol Hill, where there simply aren’t enough votes for big new taxes.
LIKE EVERYTHING IN WASHINGTON, this question depends on who has the votes. Supporters of a new, massive tax on rich and profitable corporations would need a Harris victory, a Democratic majority in both houses, and probably a constitutional challenge to a wealth tax to succeed.
HERE’S THE KEY FACTOR: The chances of high new taxes are very slim for one main reason – the Senate is likely to go back to Republicans, who strongly oppose high new taxes. We estimate that the Republicans have a 75% chance of winning the Senate even if Harris wins the presidential election.
THE MOST CONTROVERSIAL TAX PROPOSAL is an idea backed by Senator Elizabeth Warren and other liberals that would impose a “wealth tax” on unrealized capital gains. Enacting this would be a nightmare and would escalate the class warfare debate. The proposal has no chance of passing because it lacks the required 60 votes in the Senate.
Democrats have a long list of proposals for new spending, and some of them could be adopted, at least in part, in a budget reconciliation bill. However, some of Donald Trump’s 2017 tax cuts could be passed through horse-trading next year, while only Harris’ modest tax increases pass.
Ironically, Trump and Harris may need to continue imposing high tariffs on countries like China because they need the revenue. But the U.S. budget deficit, currently at nearly $2 trillion annually, could rise even further.
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ON TV TONIGHT: Harris and her vice presidential running mate Tim Walz will finally sit down for an official interview, airing tonight at 9 p.m. on CNN. We can think of a few dozen questions that could be asked, but our main one is if that’s it — will there be no more press conferences until November 5?
HARRIS AND WALZ spent a lot of time earlier this week practicing their answers. Are they ready for prime time? They’re under pressure not to slip up. If they can do that, Harris will enter the Sept. 10 debate as the leader. The stakes are high tonight: If she slips up, the press and Trump will pounce, and the race could be tied again.
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