US election impact foreign investment and taxes
Michael Campbell
by Michael Campbell
The United States will elect a new president on November 5, 2024. The candidates are former President Donald Trump and current Vice President Kamala Harris. As the world watches these two candidates battle on the campaign trail, tax professionals are analyzing their policy proposals to determine what the election might mean for taxpayers.
Trump and Harris are ideologically opposed when its comes to tax policy. While Trump favors lower tax rates and increasing tariffs on imports, Harris would prefer to increase tax rates – with a particular emphasis here on wealthy individuals, especially the top 1%.
What policy proposals have the candidates provided that might impact taxpayers outside of the US?
Donald Trump
In 2017, Donald Trump’s first year in office, with a Republican majority in both chambers of Congress, the US tax code was overhauled in a way that had not been seen since 1986 with the passage of the Tax Cuts and Jobs Act (“TCJA”). The TCJA significantly reduced taxes on businesses. Many provisions of the TCJA were set to expire after 2025.
Trump seeks to extend the tax reductions provided by the TCJA and further reduce income taxes for businesses. Specifically, he would:
Reduce the corporate tax rate to 15% or 20%
Permanently reinstate the deduction for R&D costs
Make TCJA provisions permanent, including FDII and reduced rate on GILTI
Eliminate worldwide taxation of individuals residing outside the USA
Trump’s team sees tariffs as a simple way to incentivize domestic production and has proposed a 20% tariff on all imports and 50-60% tariffs on goods imported specifically from China. It is unclear whether this will apply to goods imported from neighboring Canada and Mexico. Companies that import goods into the USA from China would be well-advised to assess the potential impact of these tariffs on their supply chain moving forward.
Kamala Harris
If elected, the current Vice-President would seek to raise taxes on corporations and high net worth individuals in an effort to increase government revenues and shift the tax burden away from low-to-middle income individuals.
Her specific proposals include:
Raising the corporate tax rate from 21% to 28%
Eliminating the FDII and GILTI deductions
Increasing corporate alternative minimum tax from 15% to 21%
Repeal unpopular BEAT and replace with OECD’s UPTR
Kamala Harris’ proposals would raise corporate taxes, which will reduce incentives to invest in the US. Eliminating the FDII export incentive, which currently provides an effective tax rate as low as 13.125% on export profits, will curb US corporations’ incentives to repatriate IP.
In summary, a win for Donald Trump could mean lower taxes for investors but higher direct taxes for importers. A win for Kamala Harris would mean higher taxes for corporations and investors. Bear in mind, however, that whoever wins, if their party does not control both the House and Senate, it is likely that there will be no major tax law changes passed until after the next election cycle in 2026.
GGI member firmKutchins, Robbins & Diamond, Ltd. (KRD)Chicago (IL), USAT: +1 847 240 1040
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KRD Ltd is a Chicago area, Certified Public Accounting firm offering a full range of accounting, tax, and consulting services. Our highly trained CPAs and advisors strive to uncover unrealized opportunities as your business changes and grows.
Michael serves as KRD's International Tax Director in KRD’s Tax practice.Contact Michael.
