(Bloomberg) -- Vice President Kamala Harris’ economic plan is focused on lowering costs and boosting economic opportunity for lower- and middle-class Americans through measures including tax credits and provisions for cheaper prescription drugs. An analysis from the nonpartisan Committee for a Responsible Federal Budget estimates that the policies outlined in Harris’ agenda for her first 100 days in office would increase deficits by $1.7 trillion over a decade. However, the Harris campaign has said the programs’ costs could be offset by raising taxes on wealthy Americans and big corporations.
Here’s how economists are evaluating key parts of her economic proposals.
Extending tax cuts
Former President Donald Trump’s 2017 Tax Cuts and Jobs Act — his signature legislation — lowered tax rates for businesses and most Americans, and is set to expire at the end of 2025. Harris has proposed keeping rates in place for those making less than $400,000, while raising taxes for higher earners. She is also pushing for an increase in the corporate tax rate to 28%, up from the current 21%. The assertion is that the higher taxes would boost US revenue.
However, extending even part of the TCJA would be “very expensive,” said Kimberly Clausing, a former Treasury Department official in President Joe Biden’s administration who’s now a professor of tax law and policy at the University of California, Los Angeles School of Law. Harris’ plan would still cost less than Trump’s, the Republican presidential nominee, who’s said he wants to extend the cuts in their entirety and implement additional reductions to the corporate tax rate.
But Clausing said that raising taxes on wealthy individuals could help pay for some of Harris’ other economic policies, including an expansion to the child tax credit.
Restoring the expanded child tax credit
Harris has proposed restoring the expanded child tax credit passed in Democrats’ 2021 American Rescue Plan, which has since lapsed. The credit would be raised to as much as $3,600 from $2,000 per eligible dependent, with a new $6,000 credit for newborns.
Economists estimate this would be among the most costly of Harris’ proposals, though they praise the economic benefits of the program — in particular its impact on child poverty. The expanded child tax credit helped drive down the child-poverty rate to a record low of 5.2% in 2021, according to the United States Census Bureau.
“Children who grow up in poverty are not going to be as productive,” said Joseph Stiglitz, a Nobel Prize-winning economist and professor at Columbia University. “They’re not going to do as well in school and they’re not going to do well later in life.”
Imposing a federal ban on price gouging
While details remain vague, Harris has called for a federal law against price gouging on food and groceries. According to her plan, new penalties enforced by the Federal Trade Commission and other agencies would be imposed on corporations that violate rules on hiking prices, and help make the food industry more competitive.
The proposal has drawn criticism from some economists who questioned how, exactly, her goal would be achieved. Most economists say price controls would be bad policy and have negative economic impacts. But increased antitrust and competitiveness policies could be beneficial, according to Mark Zandi, chief economist for Moody’s Analytics.
Zandi isn’t a fan of price caps or price fixing, but he views increased scrutiny on competitive practices and pricing practices and industries as good policy. “It should be focused on making sure that markets are competitive and that consumers have all the information they need to make good buying decisions,” he said. While these practices may slow the rate of food inflation, he adds they’re unlikely to cause prices to decline.
Creating new homeowner and homebuilder incentives
Harris has proposed as much as $25,000 in down-payment support for first-time home buyers. She has also suggested a tax incentive for builders who work on starter homes and called for the creation of a $40 billion innovation fund to spur innovations in housing construction.
According to Stiglitz, the measures have the potential to help address the housing shortage and bring down costs. Yet the programs could increase demand and inadvertently lead to higher home prices, according to Michael Strain, director of economic policy studies at the American Enterprise Institute.
Expanding health-care benefits
Harris has proposed a $2,000 annual cap on out-of-pocket costs for prescription drugs for all Americans. She also wants to limit the price of insulin payments to $35 per month, increase subsidies for insurance on the federal marketplace, and allow Medicare to expedite negotiations on drug prices.
Stiglitz said Harris’ program would be significant in cutting costs of living, specifically for those dependent on prescription drugs and insulin payments.
David Cutler, a professor of economics at Harvard University, said more details are needed to determine the federal price tag on capping out-of-pocket costs. But it “likely wouldn’t be too expensive” and the benefits that result from cheaper medications essential for many Americans could be large, he said.
Ending federal taxes on tips
Both Harris and Trump have proposed an end to federal taxes on tips, but economists are skeptical of the plan. It is viewed as more of a political talking point for the election, rather than serious economic policy.
“I doubt you can find one adviser or one policy wonk in the country that would suggest that that’s an effective way to direct money toward low income people, compared to tools that we already have,” Clausing said.
Stiglitz suggested a better way to address the issue of low pay for hospitality workers would be to increase the minimum wage.
Strain called the proposal “a gimmick that would reduce federal tax revenue at a time when the US has a very serious fiscal imbalance.”
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