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Trump vs. Harris: Will Their Tax Plans Boost or Bust Big Tech Giants Like Meta and Verizon?

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Clash of Tax Plans: Trump vs. Harris on Corporate Taxes Ahead of 2025 Decision

The impending expiration of many tax benefits under the 2017 Tax Cuts and Jobs Act (TCJA) in 2025 has ignited a fierce debate about the future of corporate tax policy in the United States. With the presidential election looming, both Republican candidate Donald Trump and Democratic candidate Kamala Harris have unveiled starkly contrasting plans, each promising vastly different economic consequences. This article delves into the specifics of their proposals, their potential impact, and what this means for American businesses and the national economy.

Key Takeaways: A Glimpse into the Tax Policy Showdown

  • Expiration of TCJA benefits in 2025: Numerous tax breaks introduced by the TCJA are set to expire, creating uncertainty for businesses.
  • Trump’s plan: Focuses on extending and potentially deepening TCJA cuts, including a potential further reduction of the corporate tax rate to 15% for companies manufacturing domestically.
  • Harris’s plan: Advocates for reversing many TCJA provisions, proposing a significant increase in the corporate tax rate to 28% to fund social programs and reduce the deficit.
  • Significant economic implications: Both plans carry substantial consequences for corporate profits, government revenue, and the overall economic outlook.
  • The role of Congress: Ultimately, the outcome will depend on the election results and subsequent Congressional action.

The Legacy of the Tax Cuts and Jobs Act (TCJA)

The TCJA, signed into law in 2017, dramatically reshaped the U.S. tax code. A central feature was the reduction in the corporate tax rate from 35% to 21%. This resulted in reduced tax burdens for many corporations, particularly large and profitable ones. However, the act has drawn considerable criticism for its perceived disproportionate benefit to high-income earners and large corporations while raising concerns about its long-term impact on federal revenue. Studies by organizations such as the Institute on Taxation and Economic Policy have shown how the drastically reduced tax rate boosted corporate profits and resulted in significantly lower tax bills for some of the nation’s largest companies.

Case Studies: Corporate Tax Savings Under the TCJA

The impact of the TCJA is vividly illustrated by the experiences of major corporations. Meta Platforms, Inc. (META), for instance, saw its effective tax rate plummet from approximately 28% to 18%, resulting in an estimated $8 billion in tax savings between 2018 and 2021. Concurrently, Meta’s profits surged by a remarkable 372%. Similarly, Verizon Communications Inc. (VZ) experienced substantial savings, reducing its tax burden by $11 billion during the same period as its effective tax rate fell from 21% to 8%. While Verizon’s U.S. Profits increased by 18%, their federal income taxes substantially decreased by 52%. These instances highlight the significant financial benefits many large corporations reaped under the TCJA.

Trump’s Vision: Extending and Deepening Tax Cuts

Donald Trump’s campaign platform calls for an extension of many of the TCJA’s key provisions. He advocates for making these cuts permanent, solidifying lower tax rates for corporations and individuals. Going even further, Trump proposes a further reduction of the corporate tax rate, potentially to 20% for all companies while offering an even more generous 15% rate specifically to businesses that manufacture 100% of their products within the United States. This significant tax cut for domestic manufacturers is intended to incentivize domestic production and boost American jobs. He also proposes allowing businesses to immediately deduct research and development expenses rather than amortizing them over several years, immediately boosting investment and employment in research intensive sectors.

The Fiscal Implications of Trump’s Tax Plan

Independent analyses, such as those conducted by the Committee for a Responsible Federal Budget, project substantive reductions in federal revenue under Trump’s plan. His proposal for lower corporate tax rates is estimated to reduce federal government revenue by approximately $200 billion through 2035. This significant decrease in tax revenue is a concern for fiscal responsibility advocates and raises questions about funding government services with such substantial spending cuts. This would add significantly to the national debt, potentially impacting future generations.

Harris’s Counter-Proposal: A Return to Higher Corporate Taxes

Kamala Harris’s approach represents a stark contrast to Trump’s. She proposes a dramatic increase in the corporate tax rate, raising it from the current 21% back to 28%. This increase would significantly boost federal revenue. Furthermore, she aims to increase the corporate alternative minimum tax rate to 21%. These proposals would reverse some of the key provisions in the TCJA and effectively increase the tax burden on corporations, potentially generating substantial revenue to offset the deficit and fund government programs.

Impact of Harris’ Plan and its Economic Considerations

Raising the corporate tax rate to 28% would significantly impact the profitability of many corporations. Notably, a corporate tax rate of 28% would place the United States among the highest in the developed world, which has economic drawbacks and may negatively impact economic growth. While generating substantial additional revenue for the federal government, such a significant increase could potentially reduce business investment and economic growth by deterring investment. Alongside the corporate tax increases, Harris advocates for a significant increase in the tax deduction for small businesses and startups, hoping to encourage innovation and job creation from the smallest organizations.

Harris’ Plan and the Federal Deficit

The Committee for a Responsible Federal Budget estimates that Harris’s tax proposals could reduce the federal deficit by approximately $1 trillion over the next decade. This substantial reduction in the deficit is a key argument and represents a sharp contrast to the potential increase predicted under Trump’s significantly lower corporate tax rate proposals. This projection stems from a combination of factors; higher corporate tax rates increase government revenue, while increased tax deductions for small businesses potentially stimulate the economy and create jobs. The net result presents a more optimistic approach to fiscal policy.

The Election and its Implications for Corporate Tax Policy

The 2024 presidential election will significantly shape the future of corporate tax policy in the United States. The proposals put forth by Trump and Harris represent diametrically opposed approaches, carrying profound implications for businesses, the national economy, and the future of the federal budget. Both candidates’ plans will require Congressional passage to be enacted, a legislative process that may result in additional changes or compromises.

The outcome of the election, coupled with shifting political dynamics in Congress, will determine the direction of corporate tax policy. This makes informed engagement in the political discourse and understanding the potential economic and social consequences of these opposing plans even more crucial.

Article Reference

Lisa Morgan
Lisa Morgan
Lisa Morgan covers the latest developments in technology, from groundbreaking innovations to industry trends.

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