The benefit scales up the more money a family makes. A person who earns $2,000 would get a $2,000 credit; someone earning $1,000 would get a $1,000 credit; and so on down to $0. The benefit also would phase out at the top of the income distribution, to prevent rich people from enjoying a federal subsidy. The resulting shape of the program’s benefits across the income distribution is a trapezoid, as illustrated below by the Tax Policy Center, a nonpartisan think tank.
Harris’s proposed tax cut would cut taxes for most working-class Americans and is more ambitious than the typical Democratic tax proposal, tax experts said. But its basic trapezoid structure — a phase-in for the poor, flat benefit for the working and middle class, and phaseout for the rich — is remarkably common in policymaking, particularly among Democrats. Harris’s plan is one of at least eight separate plans released by Democratic members of Congress during the past two years to adhere to this trapezoid structure.
Additionally, at least five of the party’s rumored presidential candidates — including Sens. Sherrod Brown (D-Ohio), Amy Klobuchar (D-Minn.), and Tammy Baldwin (D-Wis.) — have backed plans to create new trapezoid programs or expand existing ones.
“For the last 20 years, all tax proposals have more or less had this exact structure,” said Elaine Maag, an expert at the Tax Policy Center.
But devising tax policy this way is not without its critics, and their disagreement reflects a broader split in the Democratic Party over how to tailor social benefits for the poor.
Proponents of the trapezoid programs say giving money to those with no earnings could discourage them from finding work. By increasing the size of the benefit as earnings rise, the federal government is helping Americans who first help themselves, they say. These programs are often also viewed as more likely to pass into law, since they sometimes enjoy support from Republican lawmakers.
But to opponents, that’s another way of doing nothing for those who need help the most — excluding families who do not make enough to qualify. These critics say the government should send checks to the very poor with no strings attached, noting a majority of people in this group cannot work because they are children, students, elderly or sick. They also argue that the phase-in structure may lead firms to cut wages, since the tax benefit increases the labor supply and reduces worker bargaining power.
“This is trying to avoid being seen as giving money either to the very poor or the very rich — that’s what the trapezoid approach does,” said Joshua McCabe, a professor at Endicott College who studies poverty issues and has been critical of the trapezoid structure. “It allows you to avoid the trappings of being seen as giving to the ‘undeserving poor.’ ”
But some on both the left and right disagree with that approach. Samuel Hammond, a welfare policy expert at the libertarian-leaning Niskanen Center, said the trapezoid programs demonstrates the difficulty of using tax benefits to lift families out of poverty. America already spends less on children than almost any other developed nation in the world, according to a recent study by researchers at Northwestern University and the University of California at Berkeley.
“There’s been a tacit, bipartisan prejudice against unconditional cash aid. As a result, America does much more middle-class welfare, and much less for the deeply poor, than other developed countries,” Hammond said.
Matt Bruenig, a poverty expert at the socialist think tank People’s Policy Project, said socialists and liberals should agree the poor not be left out of big federal programs designed to ameliorate inequality. Bruenig also argued that Harris’s program should also not phase out for the rich, to improve its popularity by increasing the number of Americans who use it.
“Designing a transfer program to specifically exclude the poorest Americans is shockingly cruel,” Bruenig said. “We should at least be able to agree that the neediest should not be deprived. Yet depriving the neediest is exactly what these trapezoid programs are made to do.”
The bill’s critics say it has its roots in welfare reform that some poverty experts say contributed to a rise in deep poverty in the United States. President Bill Clinton attempted to “end welfare as we know it” by eliminating the federal government’s direct cash welfare program, Aid to Families With Dependent Children, in 1996. The welfare program that replaced it, called Temporary Assistance for Needy Families, was smaller and more limited in scope.
A number of tax credit programs were created or expanded to encourage the poor to enter the labor market. The earned-income tax credit, originally enacted in 1975, was dramatically expanded in the 1990s. The program pays about $70 billion every year, according to the Joint Committee on Taxation, but it does very little to help the most destitute.
The federal government in 1997 also created the child tax credit, a trapezoid-shaped program for working- and middle-class families with children, as well as a credit that compensates postsecondary education expenses, according to McCabe, the Endicott professor. During the past decade, the government has enacted another family tax credit and a credit for higher education expenses. Between 1989 and 1997, 38 separate bills to expand or create tax credits for children were introduced in Congress. Of those, 31 were structured as trapezoids, McCabe said.
Research suggests these programs have helped lift millions of poor Americans above the poverty line, as well as providing a strong incentive to work, said Maag, of TPC. A report by the Census Bureau, for instance, found only Social Security does more than the tax-credit programs to lift people out of poverty. The federal government can help the very poor through other means than tax-credit programs, Maag said.
“From my perspective, it’s not clear the IRS is the best place to subsidize people who are entirely outside the work system,” Maag said. “We shifted toward a work-based safety net, and the research is pretty strong that these programs have worked to get people out of poverty.”
Others say there has been a dramatic increase in the number of deeply poor Americans since welfare reform. The number of people living on $2 a day or less in cash increased more than twofold, to 1.6 million households since 1996, research from Johns Hopkins University’s Kathryn Edin and the University of Michigan’s Luke Shaefer has found.
About 2 million Americans have no gross income, according to the Internal Revenue Service, and therefore do not qualify for either the earned-income tax credit or the child tax credit. Another 10 million have between $1 and $5,000 in gross income and do not get the full award from the programs.
Bruenig, of the People’s Policy Project, disputed claims that the trapezoid programs had significantly reduced poverty in the United States. The federal government every year sets a poverty threshold — in 2018, $16,500 for a family of two — and the tax credit programs merely nudge people who are close to that line over it while excluding those in deep poverty, he said. “These trapezoid programs exploit the way we count poverty to make it seem like they are reducing deprivation by more than they really are,” Bruenig said. “It’s a quirk caused by the head-count poverty method.”
Some poverty experts were encouraged by the plan released earlier this year by Sens. Brown and Michael F. Bennet (D-Colo.) that gives every family a $3,600 credit per year for every child. The program does not phase in at the bottom of the income distribution, meaning the very poorest can receive the full benefit. It would cut child poverty about in half, two Columbia University researchers found. That proposal has a large price tag: $1.4 trillion over 10 years, according to the Tax Policy Center.
But that plan is the exception, as Democratic trapezoid proposals have proliferated over the last year. Brown, with Rep. Ro Khanna (Calif.), also released a bill to dramatically expand the earned-income credit that keeps its trapezoid structure. Rep. Richard E. Neal (D-Mass.), who will soon become chair of the House Ways and Means Committee, has proposed earned-income tax credit expansion that has earned bipartisan support.
Rep. Rosa L. DeLauro (D-Conn.) has a bill to expand the child credit, and Rep. Val Demings (D-Fla.) has a plan to expand a trapezoid program. Republicans including Sens. Marco Rubio (Fla.) and Mike Lee (Utah) introduced their own trapezoid-shaped child tax credit proposal, though the approach is less popular among Republicans. (A version of Rubio and Lee’s child tax credit expansion was signed into law as part of the Republican tax law passed last fall.)
In addition to Harris’s trapezoid program, former congressman John Delaney (D-Md.), who is running for president, has called for increasing the earned-income tax credit. Sens. Cory Booker (D-N.J.) and Baldwin proposed the Stronger Way Act last year to expand both the earned-income tax credit and the child tax credit. (The Stronger Way Act would change when the phase-in begins so more poor families benefit, but the phase-in remains.)
“There are a bunch of different lawmakers who put out plans like this, every time claiming it’s something new,” said Bruenig, of the People’s Policy Project. “But in reality they’re all just variations on the same trapezoid program.”