Vice President Kamala Harris is set to unveil new tax proposals to support small businesses, and put the Democratic platform into action.. These proposals include a ten-fold increase in the federal government’s small business tax deduction from $5,000 to $50,000.
The campaign highlighted that this increase is intended to alleviate the significant costs associated with starting a new business. Harris’s proposal also allows small businesses to defer claiming the deduction until they become profitable. This flexibility means businesses could utilize the deduction gradually, potentially maximizing its impact during periods of higher profitability.
Additionally, Harris aims to increase the number of new small business applications under her administration, seeking to surpass the 19 million applications received during the Biden administration to reach a target of 25 million applications.
How Harris’s economic plan extends to the Qualified Small Business Stock (QSBS) policy, which provides tax incentives to encourage the founding of and investment in small businesses is to be determined. Harris aims to create a more favorable environment for small business growth and innovation, which aligns closely with the goals of QSBS to stimulate investment in small businesses.
Moreover, Harris’s plan includes raising the corporate tax rate to 28% while targeting tax relief specifically for small businesses. This dual approach aims to balance fiscal responsibility with incentivizing economic growth at the grassroots level.
However, achieving Harris’s economic agenda depends on navigating congressional approval amidst current partisan divisions. Additionally, these initiatives have significant fiscal implications, prompting questions about funding sources and economic impact.
Preliminary estimates suggest that Harris’s economic package could potentially increase the deficit by approximately $1.7 trillion over the next decade, and as such, other tax revenue-raising measures to offset these costs may come into play. In 2021, the Build Back Better Act included many tax increases targeting wealthy individuals and large corporations, which may provide a blueprint for some such measures. One such measure called for curtailing QSBS back to a 50% exclusion level, which is what it started at when introduced in 1993.
Despite the challenges, Vice President Kamala Harris’s proposal of tax breaks for small businesses displays how her economic policy aims to expand small businesses. By fostering a more supportive environment for small businesses through enhanced tax benefits and regulatory reforms, Harris aims to reshape economic opportunities for middle-class and working Americans. The potential alignment with QSBS policy goals underscores the administration’s broader strategy to stimulate investment in small businesses amidst ongoing critiques and challenges in navigating legislative approval and economic feasibility, so we will continue to track any further developments regarding Harris’ policy proposals.
This article does not constitute legal or tax advice. Please consult with your legal or tax advisor with respect to your particular circumstance.