As the 2024 election approaches, Vice President Kamala Harris has announced a significant economic policy aimed at benefiting small businesses across the United States. During a visit to Portsmouth, New Hampshire, Harris outlined a proposal to expand the startup expense deduction by tenfold, from $5,000 to $50,000, as part of her broader economic platform. This plan is central to what she calls her “Opportunity Economy,” which focuses on empowering the middle class and fostering entrepreneurship.
Expanding the Startup Expense Deduction: A Game-Changer for Small Businesses
Kamala Harris’s proposal to increase the startup expense deduction is designed to ease the financial burden on new small businesses, which typically face high costs during their initial phase. Currently, small business owners can deduct up to $5,000 in startup expenses, but Harris’s plan would raise this limit to $50,000. This expansion could be a lifeline for entrepreneurs, helping them navigate the often costly early stages of establishing a business.
In addition to raising the deduction limit, the proposal also includes a provision that would allow businesses to defer claiming the deduction until they turn a profit. This change could significantly reduce the tax burden on startups that initially operate at a loss, offering them the flexibility to maximize their tax benefits when they are more financially stable. For instance, a small business earning $15,000 in its first year could deduct that amount immediately and save the remaining deduction for future, more profitable years.
Kamala Harris Aims to Boost Small Business Growth with Federal Contracts and Financial Support
As part of her broader economic strategy, Vice President Kamala Harris will also introduce measures to support existing small businesses through increased access to federal contracts and financial resources. One of the centerpiece proposals is to ensure that one in three federal contract dollars goes to small businesses during her first term. This initiative is designed to level the playing field for small businesses, giving them a larger share of lucrative government contracts and boosting their ability to compete with larger firms.
Moreover, Kamala Harris will call for the establishment of a fund to help community development financial institutions (CDFIs) cover interest costs for small businesses looking to expand in historically underserved areas. This targeted support aims to stimulate economic growth in regions that have traditionally received less investment, thereby creating jobs and revitalizing local economies. These proposals come as Kamala Harris ramps up her economic messaging, with recent polls showing a tight race against Donald Trump, particularly on issues of economic management and inflation. As the election draws nearer, Harris’ ability to convince voters of her economic vision will be critical to her campaign’s success.
The “Opportunity Economy” and Its Implications
The proposal is a key component of Kamala Harris’s broader economic vision, which she has dubbed the “Opportunity Economy.” This platform is centered on creating economic opportunities for the middle class and ensuring that the American economy works for everyone, not just the wealthy. By focusing on small businesses, Harris aims to stimulate economic growth from the ground up, ensuring that more Americans have the chance to pursue entrepreneurship.
Kamala Harris’s latest economic policy builds on her previous initiatives, including measures announced during a recent visit to North Carolina, where she laid out plans to address inflation and housing affordability. These proposals, combined with the expanded tax deductions for small businesses, underscore her commitment to tackling the economic challenges facing everyday Americans. However, the cost of these initiatives remains a point of contention. While the Kamala Harris campaign has stated that the costs beyond 2025 will be offset by increased taxes on corporations and high earners, the overall impact on the national debt is still unclear.
Challenges and Legislative Hurdles Ahead
Although Harris’s proposal has been met with enthusiasm by many in the small business community, its implementation faces significant legislative challenges. Any changes to the tax code must pass through Congress, where they are likely to encounter opposition from Republicans and possibly some moderate Democrats. Moreover, the proposal comes at a time when Congress is grappling with the impending expiration of certain tax cuts implemented during the Trump administration.
The Kamala Harris campaign has been clear that no tax increases would be imposed on individuals earning less than $400,000, aligning with the Biden administration’s previous commitments. However, with the election just over 60 days away, it remains to be seen whether this ambitious plan can gain the necessary political support to become a reality. Harris’s goal of 25 million new business applications during her first term, which would surpass the current record set during the Biden administration, hinges on the successful passage of this and other economic policies. As the election nears, Harris’s proposals will be closely scrutinized by both supporters and critics alike.
