Kamala Harris’ Tax Returns Reveal Conservative Financial Strategy, But May Leave Some Savings on the Table
Vice President Kamala Harris’ financial records are under scrutiny now that she is running for president. Experts have analyzed her recent tax filings and while they show that she and her husband, Second Gentleman Douglas Emhoff, have largely maintained simple finances throughout her time as vice president, some suggest they may have missed out on certain tax savings and financial strategies that could have benefitted them.
Key Takeaways:
- Conservative approach: Harris’ tax returns reflect a conservative strategy, with no major attempts to minimize tax liability through complex deductions or innovative strategies. This "safe" approach may have cost them some potential savings, but it also minimizes any possible scrutiny.
- Missed tax deductions: Experts suggest that Harris could have taken advantage of more deductions related to her book income.
- Cash heavy allocation: Harris’ financial filings reveal a significant amount of cash held in bank accounts, which, while potentially beneficial for short-term liquidity, may mean missed opportunities for growth in stock market investments.
- Limited retirement contributions: While Harris has access to pension benefits and Social Security, she might benefit from contributing more to various tax-deferred retirement accounts, such as the Thrift Savings Plan or a SEP.
"Even if she doesn’t win president, as an ex vice president, she’ll always have lots of money coming in," said Carolyn McClanahan, a CFP and founder of Life Planning Partners. "They will never lack for money, so they don’t really need to worry too much about how [tax] efficient they are, or how much they save."
What tax savings Harris may have missed
Experts believe that Harris’ tax returns could have been structured more aggressively to minimize her tax liability. "Somebody in her position could probably take more deductions," said Craig Hausz, a certified financial planner and certified public accountant. In particular, he points to the possibility of utilizing additional deductions against her book income.
For example, in 2023, Harris reported $7,272 in gross book income with a single business deduction of $1,273 for "commissions and fees." In comparison, her 2021 book earnings were significantly higher, at $452,664, with the same deduction worth $65,951.
"If I were advising her, I would say ‘let’s keep this as uncomplicated as possible, so there’s no talking points,’" Hausz said. "She’s done a very good job of that."
‘A little too conservative’ with cash
Another potential area for missed financial optimization is Harris’ cash allocations. In 2023, she reported $50,603 in bank account interest, a substantial increase from $6,054 in 2022. While this rise reflects the recent surge in interest rates due to Federal Reserve actions, some experts believe this large cash holding may be "a little too conservative."
"They’ve missed out on growth in the stock market," Hausz added.
However, Catherine Valega, a CFP and enrolled agent, cautions that this cash strategy might be appropriate depending on Harris and Emhoff’s short-term financial goals and other investments. "They took a conservative approach and that’s the right thing to do," Valega said. "You don’t see them trying to do anything super creative here to reduce their taxes."
More money toward retirement
Harris could also potentially save more on taxes by contributing more of her income to tax-deferred retirement accounts.
"Even though she could have put money in retirement plans, she didn’t need to," McClanahan said.
McClanahan suggests that Harris could be maximizing her contributions to the Thrift Savings Plan, a retirement plan specifically for federal employees. Additionally, she could consider contributing to a Simplified Employee Pension plan (SEP), a variation of Individual Retirement Accounts (IRAs).
While these contributions may help Harris save on taxes, McClanahan acknowledges that she already enjoys retirement security through pensions from her previous roles as Vice President, Senator, and Attorney General of California. She also is eligible for Social Security benefits based on her past payroll tax contributions.
"It’s good to have lots of cash when you’re a politician, so you could stay out of trouble with meeting your expenses," McClanahan said.
Overall, Harris and Emhoff’s financial strategy appears to prioritize simplicity and minimizing scrutiny over maximizing tax savings. While their approach may leave some potential savings on the table, their substantial financial resources and access to various benefits may alleviate concerns about financial security. As they navigate the presidential campaign, their financial choices will continue to be subject to public scrutiny.
