Harris tax credit would help low, middle-income families at cost of $3T: study

A new tax credit proposed by Sen. Kamala Harris (D-Calif.) would primarily help low- and middle-income households but would reduce federal revenue by almost $3 trillion over the next decade, according to an analysis from the Urban-Brookings Tax Policy Center (TPC) released this week.

“Harris’ bill is extremely ambitious and, in many ways, an improvement over the [sic] today’s [earned income tax credit],” Howard Gleckman, a senior fellow at TPC, wrote. “But it also would be very expensive at a time when next year’s budget deficit is expected to top $1 trillion.”

{mosads}Harris, a possible 2020 Democratic presidential candidate, rolled out legislation last month that would create a new refundable tax credit for low- and middle-income families. The credit could be claimed in one annual installment or in monthly installments over the course of a year.

Married couples making up to $100,000 would be eligible for the credit. The maximum credit amount is $6,000 for a married couple, with the amount phasing out as incomes go up.

TPC, whose director is a former Obama administration tax official, estimated that about 90 percent of the benefits would go to those in the bottom three-fifths of income, or those with incomes under $87,300. All taxpayers on average would see a tax cut of about $3,200.

Those with incomes below $25,500 — the bottom 20 percent — would see an average increase in their after-tax incomes of 12.6 percent in 2019 — the biggest percent gain of after-tax income of any income group. TPC said that about 56 percent of households in this income group would receive a tax cut, with much of the rest consisting of older adults who don’t have wage income.

TPC estimated that Harris’s tax credit would lower federal revenue by about $2.8 trillion from fiscal 2019 to fiscal 2028, if it’s not offset by other tax increases.

Harris has suggested paying for the credit by repealing parts of President Trump’s tax law that don’t help people making under $100,000 and by instituting a fee on large financial institutions. But Gleckman wrote that those suggested offsets would “fall far short” of fully paying for the credit.

Harris spokeswoman Lily Adams said the TPC analysis showed that “Senator Harris’ middle class tax bill would put more money back into the pockets of millions of American families” but that the study “does not take into account the full effects of Senator Harris’s proposal and her ideas for fully paying for the bill.”  

“We should eliminate the massive tax cuts for corporations and the top 1% and put that money back in the pockets of working people,” she said.

TPC’s analysis of Harris’s proposed tax credit is in line with analyses of the plan from other groups. The Penn Wharton Budget Model and the right-leaning Tax Foundation similarly estimated that the credit would cost about $3 trillion, and the Tax Foundation also estimated that those in the bottom 20 percent of income would see the biggest percent change in their after-tax incomes.