Democrats say Vice President Harris’s decision to offer a more modest capital gains tax hike on the wealthy is a step in the right direction to win over voters concerned she’s too liberal or too antagonistic to business.
The Trump campaign has cast Harris as a liberal firebrand, pointing to various positions she took in 2019 when she was running for president and courting liberal voters.
In recent weeks, since becoming the Democratic nominee, Harris has shifted toward the center, most notably in moving away from her 2019 call to ban fracking, a critical issue in swing state Pennsylvania.
Democratic strategists say Harris needs to counter former President Trump's attacks and that her proposal to raise the capital gains tax on those with taxable income to 28 percent instead of the 39.6 percent rate favored by the Biden administration is welcome news.
Democratic strategist Anthony Coley said the new proposal underscored that Harris is not the progressive some Republicans have sought to portray her as. While Coley said he has heard some mixed reviews from some in his party, he said it’s a signal to the business community that “she gets it.”
“With this announcement, she is sending a signal to the business community that she is not the bogeyman that the right paints her out to be, and that is more important in some ways than the policy,” Coley said.
Some Democrats, however, say Harris should have proposed an even smaller tax rate, or taken other steps to distinguish herself.
“I don’t know who it makes happy,” one prominent Democratic donor told The Hill in an interview. “My guess is the business community will say, ‘Why are you f‑‑‑ing with capital gains?’ The progressives’ view is, ‘Why are you giving them a break from Biden's plan?’”
“I'm not sure who she's doing it for,” the donor added.
A second donor added that it’s not part of an economic plan that will appeal most to voters, while acknowledging that it does set her apart from President Biden.
“I would not have led with this,” the donor said. “It doesn’t lower prices. It doesn’t put a cent in people’s pockets. If the whole idea was to say she’s charting a different path from Biden, well, she’s doing that.”
“But not much else,” the donor added.
Harris also faces pressure from the left, which so far has stayed relatively quiet as she has made moves to the center. Progressives generally have signaled they are willing to give Harris room on the election, because they see it as critical that Trump is defeated.
Democratic strategist Rodell Mollineau acknowledged that the practicalities of winning an election were now superseding policy priorities.
“We’re in campaign mode. There’s what you want and say, and what’s reality,” he said.
Democratic lawmakers are sounding a conciliatory tone on the tax proposal, saying it strikes an acceptable balance between various priorities.
“Vice President Harris is trying to find a balance between responsibly and fairly raising revenue, supporting investment and congressional realities. I think 28 percent does that,” Rep. Don Beyer (D-Va.) said in a statement to The Hill.
While higher taxes on capital gains will take money out of investors’ pockets, not everyone in the financial world thinks that’s a bad idea.
“We’re dealing with a tax that’s already sort of a tax break for taxpayers,” David Oh, head of tax and estate planning at Arta Finance, told The Hill. “Congress and the government could just tax us at ordinary rates … but the capital gains tax is already a tax break for us.”
Oh added that the familiarity of the 28-percent capital gains tax, which has been in effect in the past, may give it some added appeal. The highest tax rate on capital gains now is 20 percent, though another 3.8 percent tax can be triggered for income over a certain level.
“They’re going with the 28 percent because we’re creatures of habit, and 28 percent is something we’ve seen before. We’ve seen it in the late 1980s, early 1990s,” Oh said.
Harris floated a number of other proposals this week related to the economy, and a source close to the Harris campaign told The Hill that the campaign would release endorsements from a string of business leaders this week.
Harris floated plans to increase the tax deduction for startup businesses from $5,000 to $50,000, to provide low-interest and zero-interest loans to small businesses that are looking to expand, as well as offering a form of the standard deduction designed for small business.
“We will increase federal contracts with small businesses,” she said.
Significant portions of the U.S. tax code are set to expire at the end of next year, and the outcome of the November election will determine how, if at all, those expirations are addressed. Taxes on capital gains are not as significant from a revenue perspective as changes in income tax rates but could still have an effect on U.S. debt and deficit levels.
