This transcript has been edited for clarity. 

David D. Stewart: Welcome to the podcast. I'm David Stewart, editor in chief of Tax Notes Today International. This week: tax on the ballot, 2024.

We're just weeks away from the U.S. presidential election, so we decided that now is a good time to talk about both candidates' tax plans. Former President Donald Trump and Vice President Kamala Harris have outlined several proposals during their campaigns, and here to talk about them is Tax Notes White House reporter, Alexander Rifaat.

Alex, welcome back to the podcast.

Alexander Rifaat: Great to be back, Dave.

David D. Stewart: So why don't we start off with just the highest of level overviews of what the two candidates are proposing.

Alexander Rifaat: So starting with Vice President Harris, you can really break down things into two phases. The first phase, when Harris was first announced as taking over Biden for the nomination, she really focused on solidifying many of the proposals that Biden had initially come out with. And then in the second phase, you see her crafting her own policies, her own proposals that are in addition to some of the ones that Biden came out with.

With Trump, you see sort of, if you will, sort of a consolidation of his sort of overall tax plan or economic proposals, which focuses on lowering taxes for a number of situations and a number of individuals while sort of, as a way to make up that revenue, theoretically raising tariffs and going at it from that angle.

David D. Stewart: All right, so let's get into the specifics here. And I'm particularly interested in starting off with this tariff proposal from Trump. What is he planning to do on tariffs?

Alexander Rifaat: Yeah, so Trump is looking to institute a blanket tariff on all imports of up to 20 percent. He said 10 percent before he said 20 percent. He's also in recent days said as high as 1,000 percent. So he's just really looking at doing a blanket tariff on all imports, as well as raising tariffs that are currently in place for China. He's sort of made the pitch that these increased tariffs will not hit American consumers, it won't affect American taxpayers, and that it will essentially pay for several of the tax cuts that he's proposing.

David D. Stewart: Has Harris said anything about tariffs?

Alexander Rifaat: So Harris has essentially called a counter that Trump's plan for a blanket tariff would essentially be a national sales tax, and that would affect middle-income Americans. She's cited a report by the Center for American Progress, which estimates that the proposal by Trump would cost American families approximately $4,000 per year.

David D. Stewart: Here's Harris talking about that at the Democratic National Convention in August.

Kamala Harris: Now compare that to Donald Trump, because I think everyone here knows he doesn't actually fight for the middle class. He doesn't actually fight for the middle class. Instead, he fights for himself and his billionaire friends, and he will give them another round of tax breaks that will add up to $5 trillion to the national debt. And all the while he intends to enact what in effect is a national sales tax — call it a Trump tax — that would raise prices on middle-class families by almost $4,000 a year. Well, instead of a Trump tax hike, we will pass a middle-class tax cut that will benefit more than 100 million Americans.

David D. Stewart: All right, so turning to Kamala Harris's plans, I see that she's been talking a lot about child tax credits. What sort of proposals does she have there?

Alexander Rifaat: Yeah, so in addition to sticking with Biden's pledge to expand the child tax credit, she's also calling for a $6,000 child tax credit for newborns. So in addition to expanding the child tax credit, which was temporarily expanded under the American Rescue Plan, that has expired, she's adding one for newborns.

David D. Stewart: You mentioned that Trump's tariffs are meant to pay for some other policies. What other tax plans does he have?

Alexander Rifaat: Yeah, so in terms of other tax plans that he's come out with, it's really been a 'no tax on insert here what you'd like.' He first came out with a plan to eliminate taxes on gratuities for service industry workers.

David D. Stewart: Here's Trump at a June 9 campaign event in Wisconsin discussing his plan.

Donald Trump: So this is the first time I've said this, and for those hotel workers and people that get tips, you're going to be very happy, because when I get to office, we are going to not charge taxes on tips, people making tips. We're not going to do it, and we're going to do that right away, first thing in office, because it's been a point of contention for years and years and years, and you do a great job of service, you take care of people, and I think it's going to be something that really is deserved. More importantly, popular or unpopular — I do some unpopular things, too, if it's right for the country, I do what's right. So those people that have jobs in restaurants, whatever the job may be, a tipping job, we're not going after for taxes anymore. This will be ended.

Alexander Rifaat: He's also called for no tax on overtime pay, and he's also come out with no tax on Social Security benefits for senior citizens. That's on the individual tax side. He's also called for a corporate tax rate cut of down to 15 percent. He said sort of vaguely that it would be for those that produce their product in the United States. There wasn't much detail in terms of other specifics, but that's sort of been the overall strategy so far from Trump — announcing sort of pursuing these tariffs, then also dangling these tax cuts.

David D. Stewart: I understand Kamala Harris has some business tax proposals, as well.

Alexander Rifaat: Yes. So Harris has come out in favor of providing a number of incentives for start-ups, raising the start-up deduction to $50,000.

David D. Stewart: Here's Harris talking about her plan at a campaign event in New Hampshire on September 4.

Kamala Harris: And the current tax deduction for a start-up is just $5,000. OK? So then you've got to make up the delta there, got to figure out how you're going to do that. Not everyone has access to that kind of wealth and capital. So part of my plan is we will expand the tax deduction for start-ups to $50,000. It's essentially a tax cut for starting a small business.

Alexander Rifaat: Also, she's called for a number of tax credits aimed at specific advanced manufacturing industries. And interestingly, a few weeks after Trump came out with a proposal for no tax on tips, Harris followed, and also after speaking with service industry workers in Nevada, also came out in favor of that proposal.

David D. Stewart: Now one of the big issues coming down the pike for either candidate who gets elected is the expiration of the Tax Cuts and Jobs Act provisions. So are we hearing anything about their plans for dealing with those expiring provisions?

Alexander Rifaat: Yeah, so in terms of Vice President Harris, and going back to what I was saying earlier about the $400,000 pledge, she has stuck with President Biden's position that they are in support of extending the TCJA provisions, but only for those earning less than $400,000 a year. Trump, meanwhile, has called for not only the full extension of the TCJA provisions, but also a few tweaks: He's called for the increase of the cap on the state and local tax deduction. He's also proposed restoring full deductibility for research and development expensing.

David D. Stewart: And what are we seeing on manufacturing tax credit proposals?

Alexander Rifaat: Yeah, so going back to what I was saying about Harris, she's proposed specific tax credits for industries that are, as she said, on the cutting edge of technology; didn't go into specifics more than that. In terms of Trump, he has been courting many of the traditional manufacturing industries in the United States. And part of that, as I alluded to, is allowing for a reintroduction of the full expensing for research and development investments. Under the TCJA, it was changed, and so that domestic research and development investments were amortized over five years, foreign investments over 15 years. Trump wants to revert back to 100 percent deductibility in the first year. So that's quite a big shift in regards to the TCJA.

David D. Stewart: So I know you've covered some of the major aspects of Trump's "no tax on blank" proposals. Are there any other ones that have come out more recently?

Alexander Rifaat: Well, just when you thought that there couldn't be any more, he's come out with more: Last week he called for the interest on car loan payments to be tax deductible.

Donald Trump: Because today I am also announcing that as part of our tax cuts, we will make interest on car loans fully deductible. So this will stimulate massive domestic auto production and make car ownership dramatically more affordable for millions and millions of working American families.

Alexander Rifaat: He also has proposed that generator purchases could be tax deductible as well. And he also, as an appeal to American citizens living abroad, has vowed to end what he calls the double taxation of overseas residents.

David D. Stewart: All right, and another issue that's been out there has been a discussion about Kamala Harris and her proposals for unrealized capital gains. Could you tell me what's going on there?

Alexander Rifaat: Yeah, so as I was alluding to earlier, in terms of policies that Harris has sort of carried over from President Biden is this idea of taxing unrealized capital gains for high-net-worth individuals. The proposal that President Biden had previously come out with would only apply to individuals with a net worth of over $100 million. And in terms of specifics, Harris has not followed suit in terms of going into specifics on how she would pursue that plan. But judging on and looking at previous proposals, both by Biden and introduced by Democratic lawmakers, the proposal would essentially act as a minimum tax.

It'd be part of a billionaire minimum tax, although it's technically applicable to those earning — with a net worth of over $100 million. If they don't reach a certain threshold in their normal tax rate, then this minimum tax would kick in, and their unrealized gains, that and their unrealized capital gains would be taxed. The payment in the first year could be spread out over nine years; in the second year and following years, payments could be spread out over five years.

So in terms of that specific proposal, it has gotten a lot of controversy in terms of how Republicans have sort of been trying to portray this as sort of a gateway tax that, while the current proposal is only applicable to a very tiny percentage of American taxpayers, that this will eventually open the door to average, everyday Americans being taxed on their unrealized assets.

David D. Stewart: Now there's a lot of moving parts here — a lot of cutting, some tax raises, though not that many of them. So what sort of numbers are we looking at? How much are these proposals going to cost for each of these candidates?

Alexander Rifaat: Yeah, so there's been a lot of estimates put out by various organizations. In terms of some of the recent ones, there's the nonpartisan Committee for a Responsible Federal Budget that recently came out with some projections on both Harris and Trump's plans. The organization found that Trump's proposals would cost approximately $7.5 trillion over 10 years, and they found that Harris's plan would cost about $3.5 trillion over 10 years.

David D. Stewart: All right, and I guess the last thing that we have to talk about every time there's a presidential election is the tradition of presidential candidates releasing their tax returns.

Alexander Rifaat: Previous tradition.

David D. Stewart: Right. A tradition until 2016. So what has happened this year?

Alexander Rifaat: Yeah, so in terms of this election cycle, Trump, as he has in his last two runs for president, has declined to release his tax returns. Interestingly, his running mate, J.D. Vance, has also declined to release his tax returns this election cycle. On the opposite side, Harris has released — we now have 20 years' worth of tax returns for Harris; Walz we have. So in terms of candidates releasing tax returns, it's sort of been the same story that we've seen the last two election cycles.

David D. Stewart: Well, we're just weeks away from finding out which set of these proposals are going to be potentially implemented next year. So Alex, we're definitely going to have to have you back to talk about how things shake out.

Alexander Rifaat: Absolutely. Thanks, Dave.

David D. Stewart: And now, coming attractions. Each week we highlight new and interesting commentary in our magazines. Joining me now is Acquisitions and Engagement Editor in Chief Paige Jones. Paige, what will you have for us?

Paige Jones: Thanks, Dave. In Tax Notes Federal, Lawrence Zelenak explores why proposals to exempt tips from federal income tax are now politically viable. Three practitioners proposed the creation of an opt-in IRS program that would provide binding administrative hearings for taxpayers.

In Tax Notes State, Billy Hamilton examines tax-related measures on state ballots this November. Andrew Wilford examines the millionaire's tax in Massachusetts.

In Tax Notes International, Caio Malpighi explores Brazil's challenges with taxing foreign trusts. Bruce Zagaris explains recent developments in financial system gatekeeping regulations in the U.S. legal community.

And finally, in featured analysis, Bob Goulder comments on whether civil FBAR penalties should be subject to constitutional restrictions on excessive fines.

David D. Stewart: That's it for this week. You can follow me online @TaxStew, and be sure to follow @TaxNotes for all things tax. If you have any comments, questions, or suggestions for a future episode, you can email us at podcast@taxanalysts.org. And as always, if you like what we're doing here, please leave a rating or review wherever you download this podcast. We'll be back next week with another episode of Tax Notes Talk.

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