Conservative group: Kamala Harris tax credit plan would cost $2.7 trillion

Sen. Kamala Harris (D-Calif.)’s proposed new tax credit for lower- and middle-income taxpayers would make the federal tax code more progressive but lower federal revenue by $2.7 trillion over a decade, according to an analysis released Wednesday by the conservative-leaning Tax Foundation.

Under Harris’s proposal, families making under $100,000 would be eligible for a new refundable tax credit. The credit would be in the amount of up to $6,000, phasing out as income increases, and taxpayers could choose to receive it annually or in monthly installments.

{mosads}Harris, who is thought to be a possible 2020 presidential candidate, argues that the credit would help middle-class households who are struggling with increases in the cost of living while wages have been flat. She touted her proposal as she campaigned for Democrats in Iowa, home to the first-in-the-nation presidential caucuses.

The Tax Foundation estimated that taxpayers in the bottom 20 percent of income would see their after-tax incomes increase by 20.5 percent if Harris’s tax credit were enacted, while those in the top 20 percent of income would receive little-to-no benefit. Taxpayers overall would see a 2.4-percent increase in their after-tax incomes, the group said.

“Overall, it would greatly increase the progressivity of the U.S. tax code, providing low-income taxpayers a large increase in after-tax income,” the think tank wrote.

But the think tank also said the credit could have negative economic impacts because it would “slightly increase the weighted average marginal tax rate on labor.” The Tax Foundation estimated that the credit would lead to about 826,000 fewer jobs and a 0.7 percent decline in long-run gross domestic product. 

The group estimated that the credit would cost $2.7 trillion from 2019 to 2028 before economic effects are considered, and $2.8 trillion after economic effects are taken into account.

Harris has suggested paying for the tax credit by repealing parts of President Trump’s 2017 tax law that don’t help those making under $100,000, and by imposing a fee on large financial institutions. 

Kyle Pomerleau, director of the Tax Foundation’s center for quantitative analysis, said it would be challenging to use repeal of the 2017 tax law as a permanent pay-for because much of the tax law is temporary.

Harris spokeswoman Lily Adams called the Tax Foundation’s analysis “fundamentally flawed.”

“The notion that receiving a tax credit of up to $500 dollars a month would provide a disincentive for people to work is insulting to every American who shows up to work every day,” she said. “In fact, the bill would substantially increase living standards for millions of Americans, putting money back into their pockets to help them keep up with the rising cost of living.”

“The analysis also ignores Senator Harris’ plan to offset the cost of the bill,” she continued. “We can grow the economy by making it fairer for everybody and by making sure that middle class Americans have money to spend and the resources they need to support their families.”

— updated at 6:31 p.m.