California

Kamala Harris’ Proposed ‘Tax Cut’ for the Middle Class Manages to Cost Both Money and Jobs

The California senator's plan to create a new refundable tax credit is bad policy, but it says a lot about her politics heading into 2020.

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KEVIN DIETSH/UPI/Newscom

The government may still be shut down, but Congress is finally back in session, and Sen. Kamala Harris (D–Calif.) has seized the opportunity to introduce her latest legislative reform, the awkwardly named Livable Incomes for Families Today (LIFT) the Middle Class Act.

The bill, in brief, would offer all families earning less than $100,000 as much as $6,000 in refundable tax credits.

The details of the proposal were first floated back in October. Its formal introduction into the Senate on Thursday has given Harris the chance to tout her idea as a massive tax cut for the middle class—standing in contrast, she says, to the GOP's habit of just slashing rates for the wealthy.

"Instead of more tax breaks for the top one percent and corporations, we should be lifting up millions of American families," says Harris in a press release. "A real tax cut for middle class families is a good place to start. That is why the 'LIFT the Middle Class Act' is my first priority in the new Congress."

That Harris, a progressive Democrat, would be kicking off this legislative session by touting a huge tax cut is interesting, to say the least. At first glance, her idea might even sound like something libertarians could get behind. But a closer look at the "LIFT the Middle Class Act" reveals an expensive, needlessly complex piece of legislation that has much more to do with boosting the California senator's presidential ambitions than with creating good policy.

Harris' bill works by matching each dollar of earned income—defined either as wages, take-home pay for the self-employed, or Pell grants—with a dollar of refundable tax credit, capped at $3,000 for an individual or $6,000 for a married couple. Because this is a refundable tax credit, people who have no tax liability would still benefit.

That adds up to an eye-popping 10-year price tag of $2.7 trillion.

"Given the vast number of people in the U.S and the fact that the tax credit is refundable, it ends up having a pretty significant fiscal cost," says Kyle Pomerleau of the Tax Foundation. Harris' proposal, he tells Reason, would cost more than similar refundable tax credit programs like the Earned Income Tax Credit (EITC), which offers refundable tax credits to low-income working Americans.

Harris also has made rumblings that she would want her proposal to be revenue-neutral, meaning that this $2.7 trillion in forgone revenue would have to be made up for with tax increases elsewhere.

In addition to the cost, Pomerleau says that Harris' proposal would have a perverse effect on overall labor force participation, thanks to the way it winds down benefits as people begin to earn more.

Harris' $3,000 tax credit for individuals starts to taper off at a rate of 15 percent once a person's income hits $30,000. That means an individual earning $40,000 would only get a $1,500 tax credit, while someone earning $50,000 would get nothing. It's a similar story for married couples, whose tax credit starts declining once they hit $60,000 in income.

"The phase-outs that this credit hits people with are pretty significant and affect a lot of people," says Pomerleau, arguing that this tapering off creates an implicit marginal tax rate, reducing people's willingness to work and costing the economy 827,000 full-time equivalent jobs.

Harris' proposal also faces criticism from the left.

Slate's Jordan Weissman, for instance, criticizes the LIFT credits for showering benefits on people who already have jobs while doing nothing to help the poorest Americans who have no source of income at all.

Weissman also took issue with how similar Harris' proposal is to another federal program, the EITC, writing that "it's not clear why you'd want to add even more complexity to our hard-to-navigate welfare state by creating a totally new benefit rather than modernize and expand the one that already exists."

That would indeed be a flaw in the bill—if Harris' goal is to produce good policy. But if the likely presidential candidate's true purpose is to boost her political profile, the LIFT the Middle Class Act makes perfect sense.

Proposing to expand an existing tax credit does not have nearly the profile-raising potential of creating a whole new credit Harris can promote as her idea alone. That'd be especially true of any attempt to expand the EITC, an idea that's tarred by the endorsements it has recieved from prominent conservatives, like former Rep. Paul Ryan (R–Wis.), or the Heritage Foundation's Stephen Moore.

Starting from scratch has allowed Harris to explicitly frame her bill as a clear alternative to a Republican tax policy while dangling more benefits in front of likely Democratic voters.

In this way, Harris' bill is strikingly similar to her housing reform proposal from July 2018, which likewise offered a bunch of ill-conceived refundable tax credits to cost-burdened renters in high-cost urban areas. That bill, as I argued at the time, would end up spending a lot of money on progressive-leaning voters in blue states while exacerbating existing issues of housing affordability.

This, it seems, is Harris' modus operandi heading into 2020: proposing refundable tax credits to rile up the Democratic base, while leaving the messy business of crafting serious policy for a later date.

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68 responses to “Kamala Harris’ Proposed ‘Tax Cut’ for the Middle Class Manages to Cost Both Money and Jobs

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  2. It’s cute to see the “he shouldn’t face termination” claims. He embarrassed several journals, and there is nothing that these people like more than the old “Eye for an Eye” treatment. He will be embarrassed and hounded out of academia for his crimes. Just wait.

      1. The perils of multi-tasking.

        1. As well as inability to read

  3. Tax credits are, of course, not tax cuts. And it’s not an entirely inventive way to buy support from the base.

  4. Why not just give me $6,000.00 right now because my income is not equal to Jeff Bezos and that’s only fair.

    1. Rockabilly 2020!

      1. I thought Bill Clinton wasn’t eligible to run again?

  5. Somebody is offering me free money? Gimme, gimme, gimme!

  6. Don’t tax bills originate in the House?

    1. They can just delete and amend any house bill.

      1. One of the dumbest allowances ever.

  7. Harris’ $3,000 tax credit for individuals starts to taper off at a rate of 15 percent once a person’s income hits $30,000. That means an individual earning $40,000 would only get a $1,500 tax credit, while someone earning $50,000 would get nothing. It’s a similar story for married couples, whose tax credit starts declining once they hit $60,000 in income.

    It’s interesting that she would use the term ‘middle class’ in the name of the bill when most middle class people would get nothing out of it.

    1. I was curious about that as well. Though the middle class is kind of a vague term a lot of the time. People use almost as a gloss for “good people.”

      1. middle class is kind of a vague term a lot of the time. People use almost as a gloss for “good people.”

        Ass opposed to “bad people” who make too much money. How do you know if someone makes too much money? Do they have any left over after paying for basic needs and, of course, their taxes? Then they make too much money and haven’t yet paid their fair share.

        1. “How do you know if someone makes too much money?”
          If you’re a lefty, the answer is they make more than you.

      2. Utopia means never having to angle for the bougie vote.

      3. middle class is kind of a vague term a lot of the time.

        As opposed to “working families”.

        1. I’d hate to be cynical and start saying that meaningless buzzwords are an epidemic in business and politics.

        2. Is the whole family working? Including the 4 year old?

    2. The masterminds at Vox and of Obamacare determined the definition of middle class. I forget where the unpaid subsidies start kicking in.

    3. It’s for people who make decisions based on the titles or headlines, which is probably most people.

  8. “Instead of more tax breaks for the top one percent and corporations, we should be lifting up millions of American families,” says Harris in a press release. “A real tax cut for middle class families is a good place to start. That is why the ‘LIFT the Middle Class Act’ is my first priority in the new Congress.”

    Harris’ $3,000 tax credit for individuals starts to taper off at a rate of 15 percent once a person’s income hits $30,000. That means an individual earning $40,000 would only get a $1,500 tax credit, while someone earning $50,000 would get nothing. It’s a similar story for married couples, whose tax credit starts declining once they hit $60,000 in income.

    So I take this to imply that Harris actually believes that anyone who makes more $50,000/year for an individual or $100,000/year for a married couple is no longer middle class and is, in fact, part of that hated cohort of “the rich.” This heifer clearly lives in a different universe.

    1. If your reading is correct, then Harris herself is among the hated cohort of “the rich”. That’s what happens when you create a circular firing squad.

  9. Harris also has made rumblings that she would want her proposal to be revenue-neutral, meaning that this $2.7 trillion in forgone revenue would have to be made up for with tax increases elsewhere.

    Annnnd … it’s gone.

    1. Well, hang on now, maybe she’s also planning on proposing $2.7 trillion of spending cu- BWAAHAHAHAHAHAHAHA!!! *inhales sharply* BWAAAHAHAHAHAHAHAHAHAHAHA!!!!!!!!!!!

      Sorry, I couldn’t even finish that thought before laughing so hard I almost pissed myself.

      1. That would be so amazing. I feel slightly dizzy and horny just thinking about actual spending cuts.

        1. I feel slightly dizzy and horny

          I initially thought it was about CA pissing himself.

          1. Does he really need to choose?

      2. She could probably cut out the Defense budget completely and make up for the shortfall. Libertarians here would cheer…

  10. “…the awkwardly named Livable Incomes for Families Today (LIFT)…”

    Should be thrown out of the name alone.

    1. To be replaced by the Undeniably Beneficial Entitlement Riches (UBER) act

  11. It should be the “Vote For Me And I’ll Give You Other People’s Money” bill, but that doesn’t acronym too well.

    1. VFMAIGYOPM I see the potential for something up somebody’s ass.

    2. I prefer Cash Under New Terms

  12. Harris’ $3,000 tax credit for individuals starts to taper off at a rate of 15 percent once a person’s income hits $30,000.

    So- progressives want a $15/hr. minimum wage, which puts people earning such in a position where their “middle class” tax credit is getting phased out, thereby redefining “middle class” to mean “less than minimum wage”.

    Sounds about right.

    1. “I was told there would be no math…” /progtards

      1. Math is racist

        1. I thought it was sexist. I can’t keep up.

          1. Since we’re talking about Kamala Harris, you get a twofer

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    1. How will the tax changes proposed affect your lifestyle? I’m actually assuming you do everything under the table, however.

  14. So if tax cuts “lift people up”, does that mean taxes keep them down? What do tax increases do?

  15. The Obamacare incentive cliff is already huge. This would make it much worse.

    http://www.wcvarones.com/2016/…..n-and.html

  16. This is Obamacare for the tax code “Kamala Cash Back” and has absolutely nothing to do with the middle class. We will be living in a Euro-welfare state in the near future. Can’t stop whats coming.

  17. poorest Americans who have no source of income at all

    I wonder how man of these people have off-the-books jobs and pay no taxes wile still collecting government benefits of some kind..

  18. Any bill calling a Pell grant “earned income” should be laughed out of committee, and the author considered to have resigned and forfeited all pension rights.

    1. I’d have to check my records for the exact time range, but in the mid 2000s all of my scholarships and grants counted as “income” for tax purposes.

      So I’m not exactly disagreeing, but there will be some research to figure out who we’re stripping of their pension.

  19. I’m all for it. I’ve been paying taxes my entire adult life. I’ve received very little in return besides roads, schools, pointless foreign wars, etc. I’m seriously at the point where I want some of my money back and I don’t care how they do it or what the consequences are. No one else cares, why should I? If those idiots want to shovel money at me, so be it. This place is going to fall apart eventually so why not enjoy the ride and maybe hasten the downfall as well?

  20. This makes no sense:

    tax credit for individuals starts to taper off at a rate of 15 percent

    What could that mean? Especially with the examples given. I guess writers aren’t all that concerned with logical precision.

    Not that it matters of course.


  21. The details of the proposal were first floated back in October. Its formal introduction into the Senate on Thursday has given Harris the chance to tout her idea as a massive tax cut for the middle class?standing in contrast, she says, to the GOP’s habit of just slashing rates for the wealthy.

    I see that’s she’s trusting people to have zero knowledge about the last tax deal, eh? Well, that plan tends to work for politicians. Still, a tax cut is a tax cut.


    Harris also has made rumblings that she would want her proposal to be revenue-neutral, meaning that this $2.7 trillion in forgone revenue would have to be made up for with tax increases elsewhere.

    Oh, so she’s exactly like Trump except she intends to jack up taxes instead of jacking up tariffs.


    Slate’s Jordan Weissman, for instance, criticizes the LIFT credits for showering benefits on people who already have jobs while doing nothing to help the poorest Americans who have no source of income at all.

    Not that Slate authors matter at all in any context, rather like Reason authors, but the sentiment nicely shows off how Democrats are at best useful idiots. The Democrat plan of ‘throw more money at the problem’ not only doesn’t work, but it also means that they can never actually lower taxes. This, in a nutshell, shows off how big of a neophyte Harris really is. She thinks that the middle class is her bread and butter. You can almost hear the peals of Democrat laughter.

  22. Didnt Pelosi just last year call the extended tax credit by Trump (12k from 6k) peanuts?

  23. Kamala Harris, nor any other politician, advocate tax cuts.
    The US government is spending at a rate of million dollars a minute, and any tax cut would dilute this number, and America would no longer be the country that brag about such spending.
    Do we really want that on our conscience?

  24. Does every article about this woman use the same photo, or does she maintain that position all the time? Serious staring contest with someone across the aisle?

  25. I read the entire article without seeing the words “Earned Income Tax Credit”. If she thinks we don’t already have exactly that, then she should be classified as unable to care for herself.

    1. Do people know NOTHING about the existing tax code?

      That settles it. We are going to have to communicate with grunts and settle disagreements with combat for the forseeable future.

      1. Do people know NOTHING about the existing tax code?

        I realize most people don’t casually talk about marginal tax rates, but have you ever tried to? This really shouldn’t be a surprise. Our tax code is a mystery to most Americans.

        1. From everything I read it also seems to be a mystery to the people who wrote it, as well as those who enforce it.

  26. “Harris’ bill works by matching each dollar of earned income?defined either as wages, take-home pay for the self-employed, or Pell grants?with a dollar of refundable tax credit, capped at $3,000 for an individual or $6,000 for a married couple. Because this is a refundable tax credit, people who have no tax liability would still benefit.”

    Pell Grants = earned income?

    So you get paid dollar for dollar for the dollars of Pell Grant handouts you get?

    Clown World.

  27. A tech guy earning 110,000 dollars a year in the city of San Francisco might appreciate a 6,000 tax refund. That’ll cover like 3 months of the student loan repayment….. I think.

    What’s the difference between a man who earns 200 thousand dollars and a guy who earns 90 thousand dollars? Why is the latter so much more “middle class”, and why is the former more morally obligated to pay more in taxes to support the large block of American voters who effectively pay nothing in income taxes?

    It’s all arbitrary. There are some people in this country who go out of their way so much to put people in different classes – while pretending to reject labels.

  28. Quote “That adds up to an eye-popping 10-year price tag of $2.7 trillion.”
    No problem, the Mint can just fire up the printing presses! (sarc)

  29. Just another govt. welfare program, in the same vein as current earned income tax credits, meant to buy votes via stealing money from one group and giving it to another.

  30. The debt is obviously a major problem… But it is spending that is the problem, not bringing in too little money. Personally, I think most tax cuts should be focused on people in the $100K or maybe $150K a year on down range. Taxes should probably stay the same or rise for people in the $30K a year on down phase, because they don’t even cover their own shit already.

    Why? Because people in that $40-150K a year range are the ones who basically get fucked the hardest. They’re not poor enough to get BS welfare, or have effective tax rates of zero like low income people… But they’re not wealthy enough to be able to play structuring games that get their effective tax rates down super low either. That group tends to have the highest effective tax rates of all people.

    So while I can’t say I’m really on board for another tax cut right this second… If it is going to happen, it should not phase out at all. Just let everybody of every income level get it, and it will have a “progressively” small impact on wealthier people anyway.

  31. We’re talking about a liberal/left-wing Democrat, so the reality is clear: it’s all about generating propaganda not really trying to solve any identifiable problem.

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