Kamala Harris’ small business plan could cost taxpayers $20 billion over next decade: experts

Small businesses, big costs.

Vice President Kamala Harris will announce Wednesday that if elected president, she plans to increase the amount of tax breaks offered to startups tenfold, a policy experts say could cost Americans as much as $20 billion over the next decade.

Harris’ plan, which is expected to be unveiled during the New Hampshire campaign, increases the current $5,000 small business and start-up tax credit to $50,000.

“This proposal would also allow new businesses to wait to claim this deduction until they are profitable so they can reduce their taxes,” a Harris campaign official said Tuesday.

Garrett Watson, a senior policy analyst at the independent Tax Foundation, told The Post the plan would cost about $20 billion over the next 10 years.

The assessment was based in part on a provision of a 2010 federal law, the Small Business Job Creation Act, that increased the business expense deduction for start-ups from $5,000 to $10,000, at a total cost of $230 million over a decade.

However, the increased deduction expired after one year and was not extended.

“Generally speaking, it is better to give startups the space to properly deduct expenses from revenue, including future revenue, than to prohibit expense deductions or require long-term amortization of those costs,” Watson said.

Marc Goldwein, senior policy director at the nonpartisan Committee for a Responsible Federal Budget (CRFB), confirmed the $20 billion cost estimate.

“Most of what this policy does is change the timing of taxation,” Goldwein explained. “Usually, the faster deduction is beneficial, but the upfront costs are sometimes different.”

Goldwein noted that the plan would be beneficial for some businesses, but “in practice, many businesses will not be able to deduct that much in the first year.”

“I’m glad Harris acknowledges that cutting taxes helps businesses,” added Adam Michel, director of tax policy studies at the libertarian Cato Institute. “The converse is also true: raising taxes hurts businesses, big and small.”

“Rather than limiting the deductibility of small-business start-up expenses to just $50,000, a better policy would be to allow all businesses to deduct all expenses in the year they are incurred,” Michel suggested. “This, often called full deduction, is one of the most pro-growth tax reforms and was a centerpiece of former President Trump’s 2017 tax cuts.

“Unfortunately, Harris’ proposal excludes most business investment,” Michel added. “By choosing to focus on a narrow segment of American employers, her proposals will make it harder for all other companies in America to start or expand.”

Michael also warned that the Democratic candidate’s economic policies will hurt, not help, American businesses.

“Overall, Harris’ tax plan would raise taxes on small and family businesses, allowing the top individual tax rate to return to 39.6%,” he said, “and increase other taxes on companies and investments to some of the highest tax rates in the developed world.”

“If Harris really wanted to help American businesses grow, she should focus on making investment deductible for all businesses and lowering tax rates, not raising them,” Michel also said.

The Vice President previously announced that he would seek to increase the corporate tax rate from 21% to 28%.

A campaign official said Harris, 59, hopes to get 25 million new grant applications during her first term as president.

“There’s no shortage of new business applications right now, so it’s unclear why Harris would make this a priority,” said EJ Antoni, a public finance economist at the Heritage Foundation. “Instead, the problem is that most businesses can’t get off the ground or fail soon after they get off the ground because of the high costs of inflation and regulatory burdens.”

Anthony called Harris’s proposal “a classic case of the left hand not knowing what the right hand is doing.”

“Harris wants to introduce a tax on unrealized profits, higher income taxes and higher taxes on investments. If she wanted to cut taxes on small businesses, she wouldn’t be pushing for higher taxes,” he said.

The small business program is one of the few specific policy pieces Harris has proposed since taking over the Democratic ticket from President Biden, and it follows her other economic policy proposals that included banning alleged price gouging on groceries, expanding the child tax credit and offering new homeowners a $25,000 down payment — all policies that experts warned would increase inflation.