Kamala Harris tax plans ‘attack the US entrepreneurial ecosystem’

Kamala Harris’s tax plans are an attack on America’s “entrepreneurial ecosystem”, the head of a group of some of the world’s most powerful investors has warned.
The Democratic presidential candidate last week unveiled a package of economic proposals aimed at boosting the economy, including higher taxes to make “corporations and the wealthiest Americans pay their fair share”.
Her plans would represent a significant shift in the taxation of some of America’s leading chief executives, who derive much of their wealth from the value of stocks, as well as the backers and founders of start-up companies.
She has proposed a minimum 25 per cent tax rise on top earners’ income and unrealised capital gains, which includes the value of real estate, stocks and investments in start-up companies. The tax would apply to people with fortunes of more than $100 million. For those earning more than $1 million annually, Harris has proposed increasing the long-term capital gains tax rate paid after selling assets such as stocks to 28 per cent from 20 per cent.
The increase is far smaller than the 39.6 per cent rate proposed by President Biden. However, Bobby Franklin, president and chief executive of the National Venture Capital Association (NVCA), said: “Any attempt to tax unrealised gains is a direct attack on the entrepreneurial ecosystem that generates so much of America’s economic growth and global competitiveness.
“This unprecedented tax would disincentive the risk-taking that drives critical innovations and cause a dramatic slowdown in start-up formation across the country.”
The NVCA represents some of the world’s most influential investors, including Sequoia Capital and Andreesen Horowitz, the Silicon Valley venture capital firms.
Harris’s economic proposals build on unfinished plans in Biden’s economic agenda, including the tax increases in his latest budget to raise $5 trillion over a decade. She plans to raise the top income tax rate to 39.6 per cent from 37 per cent.
Harris has also repeated Biden’s promise not to raise taxes on households that earn less than $400,000 a year.
Last week Harris promised new tax credits to encourage more domestic manufacturing and to invest in sectors that will “define the next century,” including biomanufacturing, aerospace, artificial intelligence, quantum computing and blockchain, advanced nuclear power and batteries.
She has retained Biden’s proposal to increase the child tax credit to as much as $3,600 per child from $2,000 at present, which is scheduled to drop to $1,000 after 2025. She also has proposed a $6,000 bonus one-time credit for families with newborns.
In a shift away from Biden’s plan, Harris has proposed increasing the tax deduction to up to $50,000 for new small business start-up costs, from $5,000 at present. The 33 million US small businesses were responsible for 70 per cent of net new jobs created since 2019, according to Small Business Administration data.
Harris has pledged her support for start-ups and wants to expand access to venture capital to small businesses in middle America. Her campaign’s economic policy paper, titled New Way Forward, states that “opportunities to turn a good idea into a new small business should not be limited to those with connections to big banks or to those in just a few big cities that have traditionally attracted venture capital dollars”.
As president, she would aim to oversee 25 million new business applications and to “expand the startup expense tax deduction for new businesses from $5,000 to $50,000.”
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Commenting on the tax policies, Kyle Pomerleau, a tax policy expert at the American Enterprise Institute, a think tank, said: “I think that there are small differences that hint at being a little bit more business friendly. But overall, I think that she’s, at least in terms of fiscal policy, sticking with the broad contours of what Biden has been pushing.”
Harris’s proposals could reduce deficits by as much as $400 billion or add up to $1.4 trillion to deficits over a decade, depending on which ideas are implemented, according to a Reuters analysis this month of reviews by the Penn-Wharton Budget Model, the Committee for a Responsible Federal Budget, the Tax Foundation and Oxford Economics.
Donald Trump, the Republican presidential candidate, has said that he plans to extend all tax cuts he pushed through Congress in 2017. He also wants to further cut corporate income taxes.
His proposed changes would probably add $3.6 trillion to $6.6 trillion to primary US deficits over ten years, the research found.