Vice President Kamala Harris has touted a new economic plan to drive “broad-based economic growth,” but her policies contradict this message. Her narrowly targeted America Forward tax credit for “industries of the future” and taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. hikes for the rest would reshape investment yet fail to stimulate more investment overall—much like former President Donald Trump’s protectionist proposals for a universal tariffTariffs are taxes imposed by one country on goods or services imported from another country. Tariffs are trade barriers that raise prices and reduce available quantities of goods and services for US businesses and consumers. and higher tariffs on China that would reallocate, but not grow, economic activity.
Tax policies, whether rates, deductions for initial investment costs, or credits for investment and production, can change the cost of capital. A higher cost of capital leads to less capital investment, while a lower cost of capital leads to more capital investment.
Unlike industry-specific policies, which (mostly) reallocate investment from one sector to another, broad policies that lower the cost of capital across the entire economy can lead to more overall investment across the board.
This is a preview of our full op-ed originally published in Fortune.
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