The Tax Policy Center, a nonpartisan think tank, said Wednesday that Harris’s LIFT Act would add $2.8 trillion to the federal deficit in its first 10 years and an additional $3.4 trillion in the following decade. Harris has proposed paying for the tax cut by eliminating the parts of the Republican tax law passed last fall that benefit the rich, as well as levying a new tax on large financial institutions.
Because the amount an individual or couple can receive from the tax credit would diminish as their incomes rise, “nearly all” of the plan’s benefits would go to those who earn less than $87,000, the Tax Policy Center said. Its benefits are expected to be much smaller for the poorest Americans.
“As the analysis shows, Senator Harris’s middle-class tax bill would put more money back into the pockets of millions of American families,” said Lily Adams, a spokeswoman for Harris. “One of the biggest issues our nation faces is that wages are not keeping up with the rising cost of living. Big problems require big solutions.”
Harris, a former California attorney general and first-term senator, is a potential Democratic candidate for president in 2020.
The proposed tax cut concentrates its benefits on the middle class, but it faces criticism from both the right and the left.
Fiscal hawks say that it would cost too much, even more than the GOP tax law, and that it would drive up an already soaring federal deficit. Those on the left have said Harris’s plan should also offer benefits to poorest Americans, and argued it is difficult to explain to the average voter.
Harris’s proposal does not offer any benefits to Americans who have no earnings, an attempt to use the credit to reward people who work. The plan’s benefits also diminish for those at the high end of the income distribution, dwindling starting at $30,000 annually ($60,000 for married couples, $80,000 for single parents) before disappearing for those earning more than $50,000 annually (or $100,000 for married couples).
The People’s Policy Project, a socialist think tank, argued that Harris’s plan should “at the very least include the poorest among us.” (Harris aides say they have other plans that would help destitute Americans, including supporting Medicare-for-all and expanding Social Security.) A columnist at Slate also criticized Harris’s proposal as complicated and expensive, while noting that it accidentally penalizes couples who get married (combining a couple’s income can put them above the cutoff for receiving the credit).
Matt Bruenig, founder of the People’s Policy Project, wrote that the plan reflects a policy design that “perversely exclude[s] the most needy from assistance in favor of those who are on the rung just above them.”
Still, Harris’s plan would cut taxes for a majority of Americans in the bottom income bracket, or those earning less than $25,500 annually, according to the Tax Policy Center. Two-thirds of the benefits from Harris’s tax cut would go to those who earn less than $50,000, while most of the remaining third would go to those earning $50,000 to $87,300, according to the Tax Policy Center.
The distribution of proposed tax cuts from Harris’s plan contrasts sharply with the tax law Republicans passed in December.
The richest 1 percent of Americans would receive about 21 percent of the benefits from the GOP tax law in 2018, as well as 83 percent of its benefits in 2027, according to the Tax Policy Center. Only 17.4 percent of the benefits from the GOP tax cuts would go to the lower and middle classes, the center has found.
For Harris’s plan, that number is about 90 percent.
The plan is significantly more expensive than the law Republicans passed, which is estimated to cost $1.3 trillion over 10 years, not factoring in interest costs, according to the Congressional Budget Office. Because Harris has not specified how she would tax banks, the Tax Policy Center said her bill “would fall far short” of paying for itself. Conservatives have leveled similar critiques.
“If the Republican $1.5 trillion tax cut was unaffordable, then an additional $3.4 trillion tax cut is irresponsibility on stilts,” said Brian Riedl, senior fellow at the Manhattan Institute, a conservative-leaning think tank. “This is clearly a pandering attempt to buy off voters heading into the 2020 presidential race; it is not a serious proposal at all.”