In the Black: October 2024
Kamala Vs The Economy
Grab a cup of coffee and settle in, it’s going to be a long one this month. The economy is on everyone's mind and as our nation gears up to vote, this complicated subject is top of mind for so many of us.
Voters keep telling pollsters that they want to know more about Kamala’s policy positions. For a candidate that entered the race at the 11th hour, she has a remarkably robust agenda. Now, have people had time to learn about them? No. But hey, I read the whitepapers and every issue of the Economist so you don’t have to. Here’s the things you need to know:
Small Business: As someone who's spent my adult life supporting small businesses and growing one myself, I agree with Vice President Harris that Small Businesses are the backbone of the economy.
Did you know that?
Small businesses employ 61.7 million Americans, totaling 46.4% of private sector employees.
From 1995 to 2021, small businesses created 17.3 million net new jobs, accounting for 62.7% of net jobs created since 1995. (Source: US SBA)
Which is to say that prioritizing small businesses over large multinational firms can have an outsize impact on the economy. Harris’s goal is to have 25 million NEW small businesses in her first term. So how’s she going to do that? With some tweaks to the tax code which could make it simpler to file but the real star of the show is this:
Expanded Startup Tax Deduction (from $5k to $50k). It’s expensive to start a small business costing an average of $40k, which won’t surprise you dear reader. The maximum tax write off for start up expenses right now is only $5k. Moving it to up to a maximum of $50k and giving taxpayers flexibility on when and how they can claim it will go a long way to even the playing field with big corporate interests.
Home Sweet Home: Have you tried to find a new place to live lately? Whether you are renting or buying - prices are crazy high and supply is low. It’s most households' biggest expense.
How’d we get here?
1. Homeownership costs skyrocketed in 2022 with the pandemic, pricing out 2.4 million renters out of the market.
2. Housing cost burdens (spending more that 30% of your income on housing) reached their highest levels in years.
3. The supply of homes for sale remains at near-record lows.
(Source: JCGS: The State of the Nation's Housing 2023 report)
Vice President Harris is proposing a veritable arsenal of strategies:
-$25,000 in downpayment assistance for first-time homebuyers
-Streamlining permitting processes and reviews to reduce red tape and bring down housing costs, (Democrats for less regulation? Up is Down now, friends)
-Tax incentives for home builders who build starter homes sold to first-time homebuyers
-Hold corporate landlords accountable for rent-price fixing
There’s even more deep cuts like programs to expand rental assistance for veterans and expanding the Low-Income Housing Tax Credit (LIHTC) for builders.
While both candidates support reducing regulation and potentially opening up surplus federal land to build affordable housing, Trump’s central policy to address the housing shortage is mass deportations. He said he will lower housing costs by “stop[ing] the unstainable [sic] invasion of illegal aliens which is driving up housing costs,”
Stuck in the middle: Harris has some ideas for the middle class, too. She’d revive the Child Tax Credit (refundable up to $3k) and bump that number up to $5k for the newborns in the first year of life, because children are expensive! The first round of the child tax credit, which Biden had put forward (now expired) reduced child poverty rates for the lowest numbers on record (2021 stats).
For those without kiddos, she’d like to permanently extend the Earned Income Tax Credit for those without qualifying children. Right now low and middle income Americans must have children to claim this tax credit, with so many young folks skipping or delaying having children this will open it up to a wider swath of working Americans.
Trump Taxes and Tariffs
Tax cuts for Corporations: Further reduce corporate tax rates to 20% and in some cases 15%. Which for comparison, is a lower effective tax rate for corporations than an American worker earning $47k a year who pays 22% (2024 brackets).
Tariffs: Trump has proposed a 10% tariffs on all foreign goods and 60% tariff on Chinese goods,
First off: what is a tariff? A tariff is a tax paid by someone importing goods into a country- it’s not paid by the end consumer (in this case you or me) BUT here's a big BUT it will likely increase the cost we pay. Because manufacturers still need to make their money- so those increases will be passed along to us. Initial estimates show this will mean an American household spending increase between $1,800 and $4,000 a year.
“Trump sometimes claims his tariffs would replace income taxes as a source of federal revenue. But they’d replace only about 8 percent of the $34 trillion in federal income tax revenue the Congressional Budget Office expects the Treasury to collect over the next decade.“ (Source; Tax Policy Center)