US election 2024: Kamala Harris wants to expand tax breaks for small businesses to promote start-ups

The proposal, outlined by a Harris campaign official on condition of anonymity, would increase the deduction from $5,000 to $50,000. According to the official, that amount would help cover the average $40,000 cost of starting a small business, according to the campaign.

The move is the latest salvo in an escalating tax duel between Harris and Republican candidate Trump, with much at stake for the American economy. The next president will be poised to overhaul tax policy as Washington prepares to rewrite the tax code next year.

A number of tax cuts expire in 2025, and the two candidates are presenting competing, budget-busting proposals such as expanded child tax credits and exempting tips from federal taxes, which could shift the tax burden onto the population and come at a high cost.

The new proposals come as Harris lays out a policy agenda just over a month after she replaced President Joe Biden on the Democratic ticket and about two months before Election Day. The vice president has vowed to make protecting the middle class a central part of her so-called Opportunity Agenda, with measures to protect households from high prices, but critics have attacked the vice president, saying her plans so far are light on concreteness.

Similar to other proposals from Harris, the small business tax measures revive ideas supported by Biden, other Democrats and even Trump. While in office, President Barack Obama urged Congress to expand tax breaks for small businesses and reduce regulatory burdens on startups.

25 million applications

Harris will unveil her small business tax proposals in a speech in New Hampshire on Wednesday. She will set a goal of 25 million new small business tax filings during the first term of a possible Harris administration – up from the previous record of 19 million under Biden, the official said.

To achieve that goal, Harris also plans to propose measures to reduce red tape for startups, including developing a standard deduction that will save small business owners time on tax returns. The Democratic candidate will also work to reduce barriers to obtaining professional licenses that make it difficult for workers to work across state lines or allow companies to expand into other states. And she will encourage state and local governments to reduce regulatory hurdles as well.

Harris also plans to create a small business expansion fund to allow local banks to cover the interest costs of new business expansion, especially in regions that have struggled to attract investment in the past. If elected, Harris will also promise to ensure that one-third of federal funding goes to small businesses by expanding opportunities in rural areas and underserved communities.

If Harris becomes president, she will have to grapple with small business taxes in her first year in office. Small businesses in many industries face a tax increase late next year when the 20 percent tax deduction for privately held or pass-through businesses expires.

About 90 percent of U.S. businesses are organized as pass-through entities, from small mom-and-pop shops to private equity funds. The law allows business owners whose income is reported on their personal tax returns to deduct up to 20 percent of their income.

This tax break was part of Trump's 2017 tax reform, which also included cuts to individual tax rates and an expanded child tax credit. These tax cuts will expire at the end of 2025 unless Congress extends them.

Trump's promise to cut taxes is a central part of his populist economic agenda and has earned him the support of many business leaders in his third attempt at the White House. The former president has said he hopes to maintain significant tax cuts for businesses and corporations and has proposed eliminating taxes on tips and Social Security income and creating an expanded child tax credit.

Harris has said she supports eliminating the tip tax, but has proposed increasing taxes on the wealthy and corporations to mitigate the impact of her other proposals on the budget deficit.

The economy is one of the defining issues of the 2024 election campaign. Households are suffering from high prices, although Biden has tried to emphasize investments in infrastructure and domestic manufacturing.

These economic fears threaten to damage Harris' campaign as Trump tries to link her to Biden's handling of the economy and the poor marks voters are giving the incumbent president.

Harris has already unveiled measures aimed at supporting first-time home buyers and reducing rent and food costs.