Red or Blue: What the Presidential Candidates’ Tax Proposals May Mean for You

Updated October 31, 2024

Neither Kamala Harris nor Donald Trump has put forth a comprehensive tax proposal, but each has shared some aspects of their plan in campaign speeches. The candidates likely will provide more granular plans as we get closer to election day. We’ll update this article as new details emerge.

The 2024 U.S. presidential election is rapidly approaching, and business leaders are focused on how the results could alter the tax landscape. What could a win by either candidate mean for different industries and the tax climate as a whole?

Tax Proposals Overview: Trump vs. Harris

To help you prepare for potential tax impacts, let’s compare what the candidates have revealed about their respective tax plans. Then we’ll examine the industry-specific implications.

Proposal	Donald Trump	Kamala Harris
Individual Tax Rates	Make TCJA rate cuts permanent Introduce 10% middle-class tax cut Reduce 22% tax bracket to 15% Exempt tips from income and payroll taxes Exclude Social Security from income tax Reinstate the SALT deduction Overtime pay will be exempt from income tax and potentially payroll taxes	Increase top marginal tax rate to 39.6% Expand earned income tax credit Exempt tips from tax Tax capital gains as ordinary income Impose a 4% income-based premium on households making over $100,000
Corporate Tax Rate	Reduce corporate tax rate to 20% for c-corporations and 15% for companies who make product in the U.S. Make 20% QBI pass-through deduction permanent for flow-through businesses	Increase corporate tax rate to 28% Raise the corporate alternative minimum tax to 21% for large corporations with 3-year average net income over $1B
Capital Gains	Index capital gains for inflation, reducing rates	Tax capital gains as ordinary income at 28% on income above $1M Limit deferral on gains for like-kind exchanges of real property to $500K
Tax Cuts for Businesses	Make 100% bonus depreciation permanent Introduce “Made in America” tax credits Expand TCJA Opportunity Zones	Expand New Market Tax Credits Expand Low-Income Housing Tax Credit Incentivize energy-efficient upgrades Incentivize construction of starter homes and affordable rental units $50k deduction for small business startups
Tax Increases for Businesses	Impose an additional 10% tariff on imports, with an additional 60% tariff on goods imported from China	Revise Global Intangible Low-Taxed Income (GILTI) to 21% minimum tax Impose tax penalty on corporations moving jobs offshore
Estate Tax	Extend expiring TCJA lifetime exemption and maintain transfer tax rate of 40% Cap estate and gift tax rates at 20%	Restore estate tax rates to historic norms Limit duration of certain GST exemptions, decrease lifetime exemptions and increase transfer tax rate
Energy	Eliminate credits for electric vehicles Repeal residential energy-efficient property credit	Restore full electric vehicle credit Reform and extend tax incentives for clean energy
Credits, Deductions & Exemptions	Consider expanding the Child Tax Credit to a $5,000 universal credit Restore $5,000 personal exemption	Make the Child Tax Credit fully refundable on a permanent basis Increase the Child Tax Credit to $6,000 for children under age 1, $3,600 for children 2-5, and $3,000 for older children
Payroll Taxes	No new payroll taxes proposed	Impose 12.4% Social Security payroll tax (split evenly between employers and employees)
Tariffs and Trade	Impose tariffs on all imports Impose 20% tariff on every foreign import coming into the U.S.	No new tariffs proposed
Carried Interest	Extend TCJA rules, 3-year holding period for certain property to qualify for capital gains	Taxes ordinary income

Harris: Tax Plan Summary

Harris aims to boost the corporate income tax rate to 28%, penalize companies for offshoring domestic jobs and raise the minimum corporate tax. Her proposals also include a new payroll tax on wages above $400K, paid by both employers and employees. However, Harris’s plan to expand tax credits for new markets could lower tax liability for some businesses, while developers would appreciate her proposed expansion of affordable housing credits.

Also worth mentioning is Harris’s goal of boosting middle-class income via expanded earned income and child tax credits, along with tax assistance for first-time homebuyers. More money in consumers’ pockets could spur economic activity, helping businesses such as retailers, home builders and restaurants.

Trump: Tax Plan Summary

Trump has suggested reducing the corporate rate to 20% and floated the idea of dropping income tax entirely in favor of a tariff-based taxation system. Many economists believe that’s not feasible, but it suggests that Trump is open to the idea of major shakeups to the tax code. He’s repeatedly signaled his intent to impose tariffs on all imports and make the 20% qualified business income (QBI) deduction for pass-through businesses permanent. He also wants to expand current Tax Cuts and Jobs Act (TCJA) Opportunity Zones, introduce “Made in America” tax credits and codify a permanent 100% bonus depreciation rate.

While Trump’s tax cuts for businesses and high earners hold appeal, economists have warned that his proposed tariff strategy could raise prices, curtail consumer spending and negatively impact economic activity.

Potential Industry Impacts and What to Do Now

With the candidates’ tax proposals heading in such different directions, but so much still unclear, how should business leaders prepare for the next four years? For now, your best option is to stay flexible, so you can adapt your business practices to save on taxes under either future administration.

In the meantime, stay aware of potential tax changes that could affect your industry and consider how to respond if any of these proposals become reality. Here are some suggestions based on what we know about potential tax policies and how they could affect specific industries.

Healthcare

Besides potential increases in the top corporate and individual income tax rates, the outcome of the election could carry significant tax and financial ramifications for healthcare organizations:

Medicare could gain more power to negotiate the cost of drugs under a Harris administration. We could also see Medicare tax rates rise to boost program funding.
Changes to the research and development (R&D) tax credit could impact pharmaceutical and medical device companies and other healthcare industry players.
The candidates’ starkly differing views around funding for mental and reproductive health, as well as healthcare for immigrants, create a slew of potential changes that may affect physicians, medical groups, pharmaceutical companies, life science companies and other healthcare-related organizations. While not directly tax-related, these changes could have a big revenue impact based on new or restricted opportunities to deliver products and services.
If election results point to an extension of TCJA provisions, healthcare organizations should consider the potential tax benefit of changing their entity classification.
If the corporate tax rate increases under a Harris administration, it may be more beneficial to carry out favorable accounting method changes in years with higher tax rates (for a larger tax-effected deduction) and accelerate income into years with the lower tax rate still in effect.
Making pre-election projections to determine the financial implications of proposed tax law changes can help you assess your organization’s readiness to adapt.
Affordable Care Act: While Harris supports the Affordable Care Act (ACA) and claims she will expand it, Trump was formerly against it. He has since changed his stance, though it is unclear what that stance is.
The American Rescue Plan Act (ARPA), which made some temporary changes to the ACA to make health insurance even more affordable for people during the COVID0-19 pandemic, is set to expire at the end of 2025.

Tech and Other R&D-Heavy Sectors

Potential changes to various tax rates and treatment of capital gains are the biggest issues for tech companies to monitor as the election approaches:

Tech companies structured as C-corporations should consider the possibility of changes to the corporate tax rate, either higher or lower. Higher rates might reduce profit margins, lower shareholder returns and make U.S. companies less competitive globally. A lower rate could boost profit margins, enhance shareholder value and make these companies more attractive to foreign investment. A lower corporate tax rate scenario could also include the possibility of wage increases for employees and competitive pricing for tech products.
The election could also decide the fate of the 20% pass-through deduction for partnerships, LLCs and S-corporations. Owners and partners in these tech-focused entities should anticipate what could be a significant increase in tax liability after 2025 if it expires.
The disparity in the treatment of capital gains is another wild card. If your tech company typically declares large capital gains, stay alert to the potential for higher taxes on this type of revenue. A higher capital gains rate could reduce venture capital investment and slow down the pace of M&A. A reduction in the capital gains rate, however, would likely increase investment in capital ventures such as tech startups and boost overall M&A activity.
What will happen with bonus depreciation is yet one more unknown. Depending on who wins, we could see a permanent 100% bonus depreciation rate.
Harris’s proposal includes an additional payroll tax on wages above $400,000, which could be a factor for tech and other companies with heavy payroll expenditures.

Private Equity

Like tech and other industries, PE firms should closely monitor the election to anticipate the impact of future tax changes:

Lower capital gains and corporate tax rates would benefit C-corp PE firms.
Higher capital gains tax rates could reduce after-tax returns on the firm’s investments.
Stricter carried interest regulation could increase tax liability relative to current policy.
If the new administration favors more stringent labor and employment regulations, compliance costs could increase. On the flip side, PE firms could benefit from lower labor costs and fewer restrictions, which would improve their portfolio performance.
For PE firms structured as partnerships and other pass-through entities, extending the QBI deduction for pass-throughs would be good news — especially if this tax break becomes permanent.
Indexing the capital gains rate for inflation, as Trump has proposed, would be a significant advantage for PE firms. Since these firms typically see significant capital gains, an inflation-indexed rate could limit annual tax increases on their ROI.

Real Estate

The fate of the TCJA and its estate provisions, both major forces in the real estate world, may hinge on the outcome of the election:

Since most real estate companies are structured as pass-through businesses, the future of the 20% QBI deduction is a prime concern. A Harris administration could extend this tax break, but her campaign has not committed to doing so. A Trump administration is almost certain to try to make this incentive a permanent feature of the tax code.
A 100% bonus depreciation rate would allow real estate companies to expense tenant improvements and other property investment activities, lowering short-term tax liability but reducing the amount of future deductions for depreciation.
A Trump administration will likely push for continuing the TCJA’s stepped-up basis for estates, whereas a Harris administration will probably allow that provision to expire.
The Harris administration will likely limit the use of like-kind exchanges of real estate to $500K ($1M for married filing jointly taxpayers). The Trump administration is not likely to change the like-kind exchange provisions.
Both candidates promise to work for clean energy credits and other incentives to help real estate operators make their businesses more efficient.
Harris’s tax incentives for affordable housing and energy-efficient development could boost the real estate sector.

Don’t Let Tax Changes Catch You by Surprise

The only certainty about the upcoming election is that there will be tax changes that impact your organization. Find out how Armanino’s forward-looking tax advisors can help you see what’s on the horizon and position your business to thrive in the post-election economy.