Update 805 — Harris’ Economic Agenda
First Priority: Lowering Americans’ Costs
Greetings from the Democratic National Convention in Chicago, where Democrats are introducing the nation to the still-unfamiliar economic agenda of Presidential nominee Kamala Harris. That process formally began last week in Raleigh, NC, where the Vice President made clear that her first priority will be to lower everyday costs facing Americans still feeling beset by post-pandemic increases in the cost of living.
Harris knows that while the Biden-Harris administration has cut inflation from a 40-year high almost down to pre-pandemic levels, the cumulative impact of higher prices makes it a continuing scourge for Americans. Accordingly, Harris’ policy focus is on costs to families raising children, buying a first home, and purchasing groceries. We detail the ideas — some new, some controversial — below.
Best,
Dana
On Friday, Vice President Harris debuted a broad set of economic policy proposals that would lower costs for the American people. The agenda – to be implemented in her first 100 days in office – aims to bring down the cost of housing, groceries, prescription drugs, and lower taxes for low- and middle-income Americans as affordability remains a top voter concern.
Addressing Housing Supply and Costs
A principal focus of Vice President Harris’ economic initial proposals is housing, an increasingly salient issue for American families as America faces a housing shortage of between 4 and 7 million units. Indeed, with housing costs rising dramatically in the last five years, Americans now cite housing costs as their second biggest economic concern after inflation. As a result, more voters are pushing their elected officials to do something about the housing crisis. Vice President Harris’ ambitious proposal would address both the supply side and demand side problems contributing to the housing crisis.
The first part of Harris’ proposal provides incentives for the construction of three million new housing units over the next four years. Harris promises that her administration “will work in partnership with industry to build the housing we need, both to rent and buy and to take down barriers that stand in the way of building new housing, including at the state and local levels.” Her policy proposals to achieve this goal include:
- A tax incentive for building starter homes: Homebuilders who build starter homes sold to first-time homebuyers would receive a tax incentive. The Harris campaign states that the tax incentive would complement the Neighborhood Homes Tax Credit proposed in the Neighborhood Homes Investment Act (S. 657).
- Expanding affordable rental housing incentives; This proposal would include an expansion of the Low-Income Housing Tax Credit (LIHTC), the largest federal program for encouraging the creation of affordable rental housing for low-income families. There have been previous bipartisan proposals to expand the tax credit, but so far nothing has come of them.
- A $40 billion fund for housing construction: This proposal is similar to one announced in March by President Biden to create such a fund but with double the funding. Vice President Harris promises that the proposal would empower local governments to find local solutions to build housing, encourage innovative methods of construction financing, and empower developers and homebuilders to design and build rental and housing solutions that are affordable. Harris would also make certain federal lands eligible to be repurposed for affordable housing development.
- Cut red tape and bureaucracy: Vice President Harris’ plan would continue efforts by the Biden-Harris Administration to cut down on burdensome regulations that increase construction times as well as costs. Vice President Harris’ proposal also calls for streamlining the permitting and review process, including for transit-oriented development and conversions.
A second set of Harris’ housing proposals aims to lower the cost of rent for American families by “taking on corporate and major landlords,” through the following policy proposals:
- Preventing investors from buying up homes in bulk: Vice President Harris specifically endorses the Stop Predatory Investing Act (S. 2224) for this purpose. This proposal comes as investors buy an increasing share of homes on the market: according to Redfin, investors bought 1 of every 6 US homes sold in the second quarter of 2024, as well as one of every 4 low-priced homes.
- Barring rent-setting data firms from price fixing: This policy proposal comes on the heels of controversy over landlords increasingly using software to help them set prices, software that uses personal data collected from other landlords using the software and recommends setting rents based on that data. Critics claim that this price setting amounts to collusion, and at least one major software developer, RealPage, is facing several lawsuits over it.
- Capping rent increases: It is also worth noting that Vice President Harris has previously voiced support for caping “unfair” rent increases from landlords. This initiative mirrors President Biden’s recent proposal to limit rent hikes from corporate landlords renting large numbers of units to hikes of five percent annually.
Additionally, an ambitious component of Vice President Harris’ housing proposal is downpayment support for first-time homebuyers. Vice President Harris’ proposal builds on a proposal first made by President Biden, which would have provided $25,000 in downpayment support for 400,000 first-generation home buyers and a $10,000 tax credit for first-time home buyers. Vice President Harris’ proposal would expand the assistance to provide an average of $25,000 for all eligible first-time home buyers, expanding the reach of down payment assistance to over four million first-time buyers over four years.
The reaction from economists to Harris’ proposal has been mixed. Some have praised Vice President Harris’ focus on increasing the housing supply. America’s housing supply has gotten steadily worse as new home construction has not met demand and existing homeowners have grown hesitant to put their homes back on the market. Vice President Harris’ proposals, such as tax incentives for home buyers, would go a long way toward addressing this shortage. The National Association of Home Builders, for example, supported Vice President Harris’ focus on boosting housing supply.
Others have expressed less enthusiasm for the proposal. While the assistance would make purchasing a home easier for first-time buyers, it would likely increase demand at a time when it is already high, with home sellers likely taking advantage of the increased demand to raise their prices even higher. Additionally, economists across the board have denounced both Biden and Harris’ call for capping rent increases. They argue that rent control hurts housing markets by discouraging landlords from putting rental properties on the market, encourages landlords to allow rental properties to fall into disrepair, and ultimately limits both the supply and quality of rental housing.
Taking Aim at Food and Grocery Price Gouging
Americans experience high grocery prices more regularly than almost any other expense. As Harris noted on Friday, “prices went up during the pandemic when the supply chains shut down and failed, but our supply chains have now improved and prices are still too high.”
Some large companies used inflation caused by factors beyond their control as cover to increase their markups beyond what was necessary to compensate for the increased costs they faced and increase their profit margins without consumers noticing. This price gouging was further enabled by corporate consolidation as sectors throughout America’s food system have become more and more concentrated.
One meatpacker, Tyson Foods, sharply increased prices for its beef, chicken, and pork in 2021 and 2022. In the second quarter of 2022, the company estimated that it increased prices by about $500 million more than necessary to cover its increased costs. Tyson Foods’ dominance within the highly consolidated market for beef, poultry, and pork processing allowed it to raise prices with limited competition from small meat producers. The company produces roughly one of every five pounds of chicken, beef, and pork in America.
To address such corporate profiteering at the expense of American families, Harris has proposed:
- advancing the first-ever federal ban on price gouging on food and groceries
- setting clear rules of the road to make clear that big corporations can’t unfairly exploit consumers to run up excessive profits on food and groceries
- securing new authority for the Federal Trade Commission (FTC) and state attorneys general to investigate and impose strict new penalties on companies that break the rules
The proposals echo some basic elements of the Price Gouging Prevention Act of 2024 (S.3803) which was reintroduced by Senators Elizabeth Warren (D-MA), Tammy Baldwin (D-WI), and Bob Casey (D-PA), along with Representative Jan Schakowsky (D-IL), in February, though the Harris campaign has yet to specify details which are key to understanding the impact of such an effort to rein in corporate price gouging. It is impossible to comprehensively assess the impact of these proposals without details on how targeted new rules or authority would be.
Importantly, Harris emphasized her administration’s intention to “crack down on unfair mergers and acquisitions that give big food corporations the power to jack up food and grocery prices and undermine the competition that allows all businesses to thrive while keeping prices low for consumers.” The Biden administration has taken significant steps to address consolidation and promote competition in America’s food system.
Some Democrats have stopped short of endorsing the proposal outright. Senate Majority Leader Chuck Schumer (D-NY) praised Harris’ effort to bring high prices down, but reportedly said, “We’d have to see how to work it out. This is something I think is a good idea, but you have to look at the details.” Senator Tim Kaine (D-VA), up for re-election this year, echoed these emphasis on detail, saying “Smart strategy. Got to get the details right.”
CTC, EITC, PTC — Tax Credits in Fiscal Agenda
As we approach a contentious debate over scheduled expirations of individual provisions from the Tax Cuts and Jobs Act (TCJA) next year, Harris’ lowering costs agenda offers a snapshot into her priorities on tax and fiscal policy. If elected, she will be in the driver’s seat for the entirety of this fiscal debate, wielding considerable power to enact positive and lasting changes to tax policy.
Before tackling specific tax proposals presented in Harris’ economic agenda, it is important to acknowledge the “elephant in the room,” otherwise known as the $400K pledge. In his 2020 campaign, President Joe Biden pledged to prevent tax increases for those who make under $400,000 a year. This message has percolated throughout the Democratic party since its inception, drawing both widespread support and scrutiny stemming from doubts that significant revenue could be collected from such a small income cohort. While the details are far from finalized as some costly TCJA expirations would indeed raise tax liabilities for people under the income threshold, Harris and her campaign have decided to stick to the pledge, stating in their released agenda that the nominee “is committed to ensuring no one earning less than $400,000 a year will pay more in new taxes.” Although this is not a policy in and of itself, it will surely govern her stance on fiscal issues that will take the main stage next year.
In addition to stated support for the $400K pledge, Harris’ agenda includes efforts to protect and expand on the Child Tax Credit (CTC), Earned Income Tax Credit (EITC), and Health Insurance Premium Tax Credit (PTC) to provide “tax relief to more than 100 million Americans.” These changes, though likely to be offset by revenue-raising policies, could add $1.7 trillion to the national debt over 10 years per estimates from the Committee for a Responsible Federal Budget (CRFB).
- Child Tax Credit (CTC) – The main new feature of Harris’ tax agenda released last week was an additional $6,000 Child Tax Credit for families with children in the first year of life. On top of this added credit, Harris plans to restore the American Rescue Plan Act (ARPA) expanded CTC, which provided up to $3,600 per child under age 6 and up to $3,000 per child ages 6 to 17. There was no cap on the credit amount and it was fully refundable, meaning beneficiaries could receive the balance of the credit as a refund if it was larger than their tax liabilities. Before ARPA and under current law, families can claim a CTC up to $2,000 per child ages 16 and younger, with refunds capped at $1,400 per child. However, this value will decrease next year without legislative action.
- Earned Income Tax Credit (EITC) – Harris’ agenda includes an increase in the maximum EITC credit for individuals and couples without children to $1,500. Currently, the maximum value of the EITC for individuals and couples without children is $600.
- Health Insurance Premium Tax Credit (PTC) – Harris has vowed to extend improvements on health insurance premium tax credits (often referred to as Premium Tax Credits or PTCs). These improvements were enacted through ARPA and extended in the Inflation Reduction Act (IRA) through 2025. Expirations would lead to an average increase in tax liabilities of $700 per year for roughly 20 million qualified beneficiaries.
While the purpose of Harris’ limited economic agenda was to outline proposals for lowering costs, questions remain about the presidential hopeful’s plans to raise revenue to offset tax cuts and increase investment in the American people. One proposal floated by the Harris campaign on Monday is to raise the corporate tax rate, which notably is not among the list of TCJA provisions expiring next year, to 28 percent – a middle point between the current rate of 21 percent and the pre-TCJA rate of 35 percent. This idea has the support of President Biden and would raise around $800 billion over 10 years.
The Harris campaign will likely release other revenue-raising proposals as we approach November, not only to pay for proposed tax cuts and increases in spending but to pay down the national debt (which surpassed $35 trillion at the end of July). Summing up the Harris approach to fiscal policy, the economic policy agenda states that her administration would “fulfill their commitment to fiscal responsibility, including by asking the wealthiest Americans and largest corporations to pay their fair share—steps that will allow us to make necessary investments in the middle class, while also reducing the deficit and strengthening our fiscal health.” Tax increases and loophole closures Harris may consider to raise additional revenue can be found in President Biden’s FY25 budget proposal, which her campaign stated support for yesterday.
Conclusion
Harris has committed to building an “opportunity economy” focused on ensuring everyone has the chance to not just survive, but thrive regardless of who they are and where they start. These proposals are bold steps toward achieving just such an objective. While the proposals announced last week represent just the initial priorities in the Vice President’s economic plan, the Harris-Walz economic agenda appears to build on the strong work of the administration – protecting consumers, promoting competition, holding corporations accountable, as well as lowering housing costs and taxes for low- and middle-income Americans.