Vice President Kamala Harris rolled out her “Opportunity Economy” agenda on Aug. 16, one which she said will help the American middle class. Yet, some experts argue that some of the proposals could, on the contrary, hinder the financial wellbeing of these Americans.
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“She believes that when the middle class is strong, America is strong. That’s why as President, Kamala Harris will create an Opportunity Economy where everyone has a chance to compete and a chance to succeed — whether they live in a rural area, small town, or big city,” according to her campaign website.
The agenda tackles a wide range of economic issues, such as housing assistance, lowering the cost of drugs and groceries, tax breaks, help for small businesses and for education costs, as well as support for workers and innovation, as GOBankingRates previously reported.
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It Offers Tax Breaks but Will Let Trump’s Tax Cuts Expire
Harris’ Opportunity Economy tax plan includes expanding the child tax credit up to $3,600 per child, as well as a new $6,000 child tax credit for families with children in the first year of life. Harris has also promoted expanding the earned income tax credit to cover individuals and couples in lower-income jobs — which would cut their taxes by up to $1,500, according to a press release.
“Phrases like ‘opportunity economy’ are wonderfully vague but ultimately meaningless,” said EJ Antoni, public finance economist at The Heritage Foundation. “What matters is the actual policies themselves, and those are terrible.”
According to him, Harris says she’ll cut taxes for the middle class, but has already vowed to raise their taxes by letting former president Donald Trump’s tax reform — Tax Cuts and Job Acts (TCJA) enacted in 2017 — expire. These changes are set to sunset in 2025.
In addition, he argued that Harris says she’ll grow small businesses and invest in entrepreneurs, but has “vowed to raise their taxes as well.”
Another argument regarding the proposed tax cuts is that since the country is running a budget deficit, a tax cut for the middle class is “a tax cut for today’s middle class that will be paid for by tomorrow’s middle class.”
“It is therefore a cynical vote-buying scheme where the bill for buying the votes will be presented to children and unborn children,” said David C. Rose, senior research fellow at the American Institute for Economic Research.
Housing Assistance Will Put Pressure on Prices
In terms of housing assistance, Harris’ proposal includes first-time homebuyers tax credit of up to $25,000; lower rents by “taking on corporate and major landlords,” and passing the Stop Predatory Investing Act. This latter act would ostensibly reduce the ability of large investors to buy rental homes “in bulk” — a practice which is lowering the supply and hiking up prices.
For The Heritage Foundation’s Antoni, however, Harris’ plan to increase housing affordability will do just the opposite.
“She would implement what amounts to a demand subsidy. Increasing demand puts upward pressure on prices, making homes more expensive, not less,” he said. Antoni added that down payments involve leverage, making it likely that her subsidies would increase the price of homes by even more than the handouts given to homebuyers.
It Vows to Lower Costs but It’s Not Addressing Inflation
Harris said that “as President, she will direct her Administration to crack down on anti-competitive practices that let big corporations jack up prices,” according to her campaign website.
To that end, she proposes to implement a federal ban on price gouging on food and impose penalties on companies that don’t abide by the rules.
“Harris says she’ll take on bad actors to reduce prices, but the worst actor in this regard is her, and the federal government more broadly,” said Antoni.
He further argued that Harris’ own administration’s data disproves the “price-gouging” narrative.
According to him, prices paid by businesses and consumers alike have both increased 20% since she took office, meaning businesses have merely passed on to consumers the higher cost of doing business. This increased cost has resulted from inflation, and that inflation was caused by runaway government spending, per Antoni.
“In short, Harris is promising more of the same policies that got us into this mess, while also promising the opposite result,” he added.
The Size and Scope of the Plan Could put Pressure on Middle Class Americans
Overall, the main concern for middle-class taxpayers would be the size and scope of the Harris’ campaign’s proposals — such as increased assistance to home buyers and tax deductions for small business owners, according to Dr. James Ronan, adjunct professor of political science at Villanova University.
While these may be popular with certain voters, funding for such programs will require revenue to be found either through budget cuts or increased tax revenue, he added.
Now, in terms of tax revenue, the Harris campaign does cite increased taxes on corporations and higher earners — yet, this would require such a budget to be approved by a Congress that likely will be very narrowly divided, Ronan suggested.
“Without budgetary approval, these proposals will either have to be significantly reduced or funding will have to be found elsewhere,” he said.
It Might Put More Pressure on Small Businesses and Hurt Consumers
To help small businesses, Harris offers to implement a $5,000 to $50,000 startup expense tax deduction, according to her campaign website.
However, another one of her proposals — the anti-price gouging effort — might actually hurt these same small businesses, according to Ben Johnston, COO at Kapitus.
“If the Harris administration imposes price caps on certain foods, small business owners may struggle to manage rising production and distribution costs, especially in an inflationary economy,” said Johnston.
According to him, without the ability to pass these costs onto consumers, many small businesses could find themselves operating at a loss, leading some to exit the market altogether.
“This would not only create shortages but could also drive prices higher for consumers, further complicating the challenges small business owners face,” he said. “It’s essential to consider how these regulatory changes might inadvertently harm the very businesses they aim to support.”
Editor’s note on election coverage: GOBankingRates is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories. You can find more coverage of this topic on GOBankingRates.com.
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This article originally appeared on GOBankingRates.com: I’m an Economist: 5 Reasons I Believe Harris’ Opportunity Economy Will Hurt the Middle Class
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