Conservative economists are pouring cold water on a new proposal aimed at lowering the costs of starting a new small business as part of Vice President Kamala Harris' “opportunity economy” economic agenda.
Vice President Harris announced new small business tax proposals last week aimed at easing the costs associated with starting a new business, including a significant increase in the standard tax deduction for small business start-up costs from $5,000 to $50,000. “This is essentially a tax cut for small business start-ups,” Harris said in a speech announcing the plan. “We're going to help more small businesses and innovators get started.”
At the same time, Harris has said she supports raising marginal tax rates for both corporations and individuals, which conservative economists argue would reduce the benefits of a 10-fold increase in the startup deduction.
“She wants to raise taxes on all kinds of income, all kinds of income brackets, so no matter how small businesses end up structured, they're still going to pay more in taxes,” conservative economist EJ Antoni told Fox News Digital. “So does increasing this tax credit alleviate that? Absolutely. But then why do both? It doesn't make sense.”
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Antoni noted that under the Trump administration, marginal tax rates were lowered while the standard deduction was increased. Additionally, former President Trump's tax cuts allowed small business owners to claim a deduction for “qualified business income.” It will ultimately be up to Congress to decide whether to preserve the expiring Trump tax cuts.
Speaking at the Economic Club of New York on Thursday, Trump unveiled his plan, which includes lowering the corporate tax rate to 15% from the current 21%. Trump's first-term tax cuts lowered the corporate tax rate from 35%.
“Harris wants to do the exact opposite of[Trump],” Antoni said. “She wants to increase deductions, but she also wants to increase marginal tax rates.”
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Harris supporter Robert Wolf, former chairman of global asset manager UBS Americas, noted that raising personal tax rates would only affect people making more than $400,000 a year.
“We want small businesses to get started,” Wolf said, “and we know that the start-up phase takes time. So the idea of not celebrating small businesses and entrepreneurs getting tax credits doesn't make sense to me.”
Under current tax law, new business owners already can deduct most start-up expenses, such as payroll and equipment costs, said Richard Stern, director of the Heritage Foundation's Grover M. Herman Center for the Federal Budget. But the tax code defines start-up costs as expenses incurred before a business registers with the federal government, which Stern said are typically very small.
“Harris' new small business tax credit is not a subsidy for starting a business,” he said. “It only works if you actually spend $50,000 in pre-startup expenses. So it's a disproportionately large subsidy for starting a business.”
Stern agreed with Antoni that Harris is essentially giving to small businesses on one hand and taking away from them on the other.
Meanwhile, Antoni suggested that whoever is crafting economic policy for Harris' campaign is “assembling the train as it runs on the tracks.”
“There are no pre-thought-out policy proposals at all, they just seem to be thrown together,” he said.
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Vice President Kamala Harris helped shape President Biden's economic strategy, known as “Bidenomics.” (Getty Images)
While right-wing economic experts argue Harris' latest tax proposals are undercut by plans to increase taxes elsewhere and will do little to help inexperienced business owners start their first companies, Harris supporter Roger Hochschild, former CEO of Discover Financial Services, said the move is “critical to spur further economic growth.”
“I think she's been very clear in her support of small business and recognizes that small business is the bedrock of our economy,” Hochschild said.
A similar sentiment was echoed by Rhett Battle, a former adviser to Biden's 2020 campaign. According to NBC News, Battle said increasing the tax credit demonstrates Harris' “deep commitment” to entrepreneurs.
“It has a broad impact on people from all walks of life,” Battle said. “Small business and entrepreneurship tend to be a great unifier in a world where people's political stances are very different.”
In addition to new tax proposals for small businesses, Harris also unveiled plans this week for a capital gains tax. Harris wants to raise the tax rate to 33%, while Biden wants to nearly double the current rate of 23.8%, according to The Wall Street Journal.
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Fox News Digital reached out to the campaign for comment on its criticism of Harris' small business tax bill, but was directed to social media posts from small business owners who will be speaking at Harris' rallies.
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“Do you think your small business is doing better now than it did under Trump?” NBC reporter Gabe Gutierrez asked entrepreneurs.
“Yeah, absolutely,” business owner Brad Smith responded, “And I think it has everything to do with optimism. If you have a pessimistic candidate or president, you're not going to start a business.”
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