Happy Monday! Vice President Kamala Harris says she will release her economic plan this week, and she’s scheduled to make a joint appearance with President Joe Biden in Maryland on Thursday to discuss “the progress they are making to lower costs for the American people.” We’ll also get some key economic data, with an update on inflation due out on Wednesday and a report on July retail sales coming on Thursday. Before any of that, though, Republican presidential nominee Donald Trump is scheduled to be interviewed at 8 p.m. ET tonight on X, formerly known as Twitter, by the social media platform’s billionaire owner, Elon Musk, who has endorsed the former president.
Here's what you should know.
Harris Backs Ending Taxes on Tips, Echoing Trump
As she prepares to release her economic policy platform later this week, Vice President Kamala Harris is borrowing a page from her rival’s playbook, announcing at a campaign rally in Las Vegas on Saturday that she endorses the idea of exempting tips and gratuities from federal income taxes.
Speaking to a capacity crowd that included members of the Culinary Workers Union, which represents thousands of service industry workers who rely on tips for a substantial part of their incomes, Harris said she also wants to raise the federal minimum wage.
“It is my promise to everyone here when I am president, we will continue our fighting for working families of America, including to raise the minimum wage and eliminate taxes on tips for service and hospitality workers,” she said.
The White House backed Harris’s proposal Monday, with Press Secretary Karine Jean-Pierre telling reporters that President Joe Biden would “absolutely” sign legislation to eliminate taxes on tipped wages and raise the minimum wage.
Echoing Trump: In an appearance in Las Vegas in June, former president and current Republican nominee Donald Trump raised the issue for the first time, having reportedly gotten the idea from a waitress in the gambling mecca. “When I get to office, we are going to not charge taxes on tips,” Trump said at a campaign rally. “We’re going to do that right away, first thing in office because it’s been a point of contention for years and years and years and you do a great job of service.”
Over the weekend, Trump angrily accused Harris of “stealing” his idea. “Kamala Harris, whose ‘Honeymoon’ period is ENDING, and is starting to get hammered in the Polls, just copied my NO TAXES ON TIPS Policy,” Trump wrote on his social media platform. “The difference is, she won’t do it, she just wants it for Political Purposes! This was a TRUMP idea - She has no ideas, she can only steal from me.”
Trump’s initial proposal was rejected by the local culinary union, which denounced what it described as “wild campaign promises from a convicted felon.” The same union officially endorsed Harris last week, before she publicly expressed support for the elimination of taxes on tips.
Policy questions abound: Eliminating federal income taxes on tips and raising the federal minimum wage would require new legislation and congressional approval. That legislation would need to address some thorny issues, such as how to handle what could be an avalanche of adjustments in the way people are paid. Skeptics say that if tips are made exempt from taxes, some highly paid workers such as hedge fund managers and stockbrokers will suddenly arrange to be paid in tips, at least as far as the IRS is concerned.
A Harris spokesperson said the Democratic nominee would ensure that high-income workers do not benefit. “As President, she would work with Congress to craft a proposal that comes with an income limit and with strict requirements to prevent hedge fund managers and lawyers from structuring their compensation in ways to try to take advantage of the policy,” the spokesperson said in a statement.
The fiscal cost of eliminating taxes on tips is also a potential problem. An analysis by the Committee for a Responsible Federal Budget found that Trump’s proposal would cost between $150 billion and $250 billion over 10 years. An updated analysis released Monday that includes an increase in the minimum wage found that the Harris plan would cost between $100 billion and $200 billion over 10 years, though that estimate could rise if tipping behavior changes substantially, and much depends on how exactly the policies are rolled out.
A bump for Harris: Even before offering a full suite of economic policy proposals, public perceptions of Harris’s abilities appear to be improving. A new poll conducted August 1-5 by the Financial Times and the University of Michigan Ross School of Business shows that more Americans trust Harris to handle the economy than Trump — the first time the Democratic nominee has led on that issue in monthly data going back to February.
The poll may highlight Biden’s weakness as a candidate more than Harris’s strength, but the results suggest that more voters are willing to consider her as an alternative to Trump. Still, Trump maintains an advantage on some economic issues. Most poll respondents reported a negative view of the economy, and more said they thought they would be better off under a Trump presidency than a Harris one.
Differing on the Fed: As part of his campaign to convince Americans that he is the stronger candidate on economic matters, Trump said last week that he would like to help the Federal Reserve manage monetary policy, contradicting a longstanding prohibition on political interference with the central bank. “I think that in my case, I made a lot of money, I was very successful, and I think I have a better instinct than, in many cases, people that would be on the Federal Reserve or the chairman,” Trump told reporters at a press conference in Florida.
Trump’s running mate, Sen. JD Vance of Ohio, endorsed the idea over the weekend. “President Trump is saying I think something that’s really important and actually profound, which is that the political leadership of this country should have more say over the monetary policy of this country,” he said. “I agree with him.”
Harris made it clear that she had no intention of copying this page from the Trump playbook. “I couldn’t ... disagree more strongly,” Harris told reporters in Arizona. “The Fed is an independent entity, and as president, I would never interfere in the decisions that the Fed makes.”
Quote of the Day
“It’s one bad idea layered on top of another.”
− Howard Gleckman, a senior fellow at the nonpartisan Tax Policy Center, criticizing the idea of eliminating taxes on tips in a Politico article discussing how the idea, now embraced by both Donald Trump and Kamala Harris as well as service industry workers, dismays economic policy wonks and deficit hawks.
Politico’s Nick Niedzwiadek and Bernie Becker write that “economists on the left and right are sounding alarms about unintended consequences. Depending on how such a tax cut is structured, they warn, it could pile onto the already unsustainable federal deficit, ding Social Security and Medicare, and open a tempting loophole for high-end earners like financiers to recategorize their income to shield it from taxes.”
Or as Gleckman puts it: “There are not a lot of tax upsides.”
Number of the Day: $244 Billion
The federal budget deficit totaled $244 billion in July, the Treasury Department reported Monday.
The government paid out $574 billion in July while taking in $330 billion. The resulting deficit was 10% larger than the deficit recorded in July 2023.
In the first 10 months of the 2024 fiscal year, the deficit totaled $1.52 trillion, which includes $763 billion for interest payments. The Congressional Budget Office expects the full-year deficit to come to $1.9 trillion, or $2.0 trillion once adjustments are made for calendar effects.
Freedom Caucus Lays Out Its Strategy for Coming Spending Fight
When Congress returns from the summer recess next month, they’ll have just a few weeks to fund the government past the end of September and avoid a shutdown of federal agencies. Lawmakers are expected to pass a short-term spending bill called a continuing resolution, but the details of that measure, especially its duration, remain in question — and could be the subject of a September fight.
House Speaker Mike Johnson, a Louisiana Republican, will have to negotiate with Senate Democrats and the White House, though he may also have to overcome divisions on strategy within his own conference. The ultraconservative House Freedom Caucus on Monday announced its position on the matter, urging Republican leaders to seek a funding extension that stretches into early next year to avoid a massive post-election spending bill that could preserve Democratic policy preferences.
Many on the right want to allow a potential Trump administration to have a say on spending in the first months of 2025. Other Republicans are reportedly pushing to have a spending package finalized this year, arguing that it would allow a potential Trump administration to get a jump start on its agenda, free of any lingering spending battles and the distractions they could cause.
The Freedom Caucus made clear that it would prefer that House Republicans pass all 12 annual appropriations bills “to cut spending and advance our policy priorities,” but acknowledged that a continuing resolution may be inevitable. Republican leaders had laid out ambitious plans to pass all 12 full-year funding bills by August, but those efforts were derailed by continuing GOP infighting that led party bosses to cancel planned votes and head out of town a week early.
The House has passed five of the 12 spending bills. The Senate has passed none so far.
The Freedom Caucus also called on leaders to include the SAVE Act with the continuing resolution. That bill that would require people registering to vote to provide documentation of their citizenship, even though voters are already required to affirm their citizenship status when they register, and it is already illegal for noncitizens to register and vote. Democrats would oppose packaging that legislation with the funding bill, meaning that its inclusion would raise the chances of a shutdown.
Fiscal News Roundup
- White House Launches Broad New Regulatory Effort, as Harris Prepares to Unveil Economic Plan – CNBC
- Harris Endorses Eliminating Taxes on Tips, Touting Policy First Proposed by Trump – CNN
- Biden Would Sign a Bill Eliminating a Tax on Tips, White House Says – The Hill
- Harris, Trump See Votes in Not Taxing Tips. Experts See Trouble – Politico
- Kamala Harris Is More Trusted Than Donald Trump on the US Economy – Financial Times
- Vance Backs $5,000 Child Tax Break in Bid to Steady Campaign – Bloomberg
- Harris Says She Would Never Interfere in Fed Independence – Reuters
- House Freedom Caucus Sets Its Terms for September Spending Fight – Politico
- Harris Is Pushing Joy. Trump Paints a Darker Picture. Will Mismatched Moods Matter? – Associated Press
- Harris Says Trump Will Repeal Obamacare. Trump Now Claims He’ll Make It ‘Better’ – New York Times
- Dozens of Pregnant Women, Some Bleeding or in Labor, Being Turned Away From ERs Despite Federal Law – Associated Press
- How to Get Relief From Unexpectedly High Medical Bills – Associated Press
- Insurance Lobbyists Block Federal Crackdown on Costly Retirement Advice – Washington Post
- Bank of America CEO Says Research Team ‘Does Not Have Any Recession Predicted Anymore’ – The Hill
Views and Analysis
- The Unwritten Harris Agenda – Rachael Bade, Eugene Daniels and Ryan Lizza, Politico
- No Tax on Tips: Why Politicians Love It, and Economists Don't – Luke Garrett, NPR
- Here's What's Wrong With Trump's Pledge to Repeal Taxes on Social Security Benefits – Gabriella Cruz-Martínez, Kiplinger
- A Policy Gimmick Amid the Joy – David Dayen, American Prospect
- How Harris’ Vision for the Economy Is a Twist on Biden’s – Asma Khalid, NPR
- Kamala Harris’s Plan to Exempt Tips from Taxes and Raise the Minimum Wage – Committee for a Responsible Federal Budget
- Americans’ Refusal to Keep Paying Higher Prices May Be Dealing a Final Blow to US Inflation Spike – Christopher Rugaber, Associated Press
- JD Vance’s ‘Constitutional Crisis’ in the Making – Ankush Khardori, Politico
- Back to the Future: Can the Government Reduce Its Debt Again? – William G. Gale and Tayae Rogers, Tax Policy Center
- The Collision of Medicaid World Views – Drew Altman, KFF
- Trump’s Crucial Power Has Been Neutralized – Jeff Greenfield, Politico
- Losing Makes Trump Crazier, and Being Crazy Makes Him Lose – Jonathan Chait, New York
- Trump Calls Harris a ‘Communist.’ That Shows How Worried He Is – Paul Krugman, New York Times
- The MAGA Misinformation-Industrial Complex Has Gathered Steam Since 2020. Here’s How – Donie O’Sullivan, CNN