Update 363 — 2020 Presidential Cand. Series:
Economic Agenda of Senator Kamala Harris
The chief economic proposal offered by Sen. Kamala Harris is a progressive, redistributive tax cut providing relief to middle-class Americans. Its significant revenue cost is only partially offset in the current proposal. We’ve seen tax proposals of similar scale (Trump), beneficiaries (BIll Clinton) and fiscal cost (both). Proposing tax cuts almost always works and in a progressive year, a big and redistributive one should be a winner.
But are Americans as eager for another tax cut this year as they historically have been or are they keener to get additional needed revenue from wealthy taxpayers…?
Below we survey this and the other big-ticket economic policy items candidate Harris is running on. We consider them in the context of the Democratic primary and their prospects as legislation in the next Congress.
Good weekends, all…
Before becoming Senator in 2017, Kamala Harris had a long career as a prosecutor, serving as Attorney General of California, 2011-17. As a candidate for president, Harris’ signature 2020 economic policy proposal is the LIFT (Livable Incomes for Families Today) the Middle Class Act, a tax expenditure plan that would expand the social safety net through new tax credits.
Questions remain about how to finance the project and whether it has a legislative future after the election. While LIFT gives low- and mostly middle-income earners relief and cash-in-hand, is it an effective anti-poverty tool?
LIFT the Middle Class
Sen. Harris’ LIFT Act would provide middle- and working-class families a refundable tax credit to offset rising costs of living. Eligible recipients could decide whether to receive up to $500 on a monthly basis, or up to $6,000 at the end of the year.
Like the Earned Income Tax Credit (EITC), benefits are phased-in with work. Eligible taxpayers would receive a LIFT credit equal to the maximum amount ($500 per month or $6,000 per year) or their earnings, whichever is less. Benefits are also phased out. LIFT Act benefits would be distributed on top of already existing refundable tax credits such as the EITC and the Child Tax Credit (CTC).
Cost estimates vary in the range of $2 to $2.7 trillion over a 10-year period. Sen. Harris has said she will fund LIFT with a full-fledged repeal of TCJA and “fees” levied on large corporations, but the legislative text is vague on the details. Harris’ staff has said the pay-for section of the bill is merely a “conversation starter,” putting into question its viability in the short-term.
The LIFT Act has garnered praise and opposition, with one side saying it will redistribute resources to a struggling middle class and the other side claiming it will be a budget buster and disincentive to work. What is not debatable is the progressivity of the proposal; those in the bottom-two income quintiles would receive nearly 60 percent of LIFT Act benefits, and those in the bottom-three income quintiles would receive 82 percent of benefits. That’s over $2 trillion worth of income redistribution, zero percent of which goes to the top one percent of earners. Sen. Harris also touts the LIFT Act’s effects on the racial income gap, with 28 percent of benefits accruing to black and latino households (TCJA benefits went to just 12 percent of black and latino households).
While the LIFT Act would benefit middle- and working-class families, its current structure excludes vulnerable groups of Americans. Because credits phase-in with earnings, the very-poor, unemployed, full-time students, and retirees — among other groups — cannot qualify. And unlike the EITC and CTC, LIFT credits would not depend on the number of children in a household. If it were to become law, the LIFT Act would be a step forward, especially in terms of righting some of the wrongs done to the tax code by TCJA, but its shortcomings reveal how much more needs to be done.
- Affordable Housing: In April, Sen. Harris reintroduced her “Rent Relief Act”. The bill would create monthly, refundable tax credits which would benefit households who spend more than 30 percent of their income on rent. With the cost of housing rising across the country, Harris’ bill would give renters much needed relief and flexibility. Affordable housing is also at the top of House Democrats agenda this congress, so this proposal could get attention with a possible-Democratic majority in the Senate post-2020.
- Holding Wall Street accountable: On Wednesday, Sen. Harris introduced the Accountability for Wall Street Executives Act, a bill that attempts to redress the “too-big-to-jail” phenomenon at big banks by empowering state attorneys general to enforce state law compliance by national banks. The bill would grant state AGs the authority to conduct oversight, issue subpoenas to inspect bank records, and interview top executives.
- Workers’ rights and equal pay: Sen. Harris supports ending right-to-work laws nationwide. She introduced the Fairness for Farm Workers Act, which would bolster Fair Labor Standards laws to guarantee overtime pay and eliminate minimum wage exemptions for agriculture workers. In May, Sen. Harris announced a plan that includes fining companies with over 100 employees who don’t provide equal pay for comparable work, regardless of gender.
For the past three decades, Democrats, led by President Bill Clinton, have largely eschewed direct spending proposals and FDR-style direction of the federal government in favor of targeted tax credits. This strategy has advantages in theory. Securing 60 votes in the Senate for progressive reforms seems insurmountable in today’s gridlocked Congress and tax proposals can be pushed through Congress using special budget rules. Tax credits garne more bipartisan support and proposals to ‘cut taxes’ are proven political winners willy-nilly.
But Democrats are fighting on Republican’s turf, ceding the argument that wealth redistribution and economic dynamism are best solved through the tax code. And when did a Democratic tax proposal last win any GOP votes because it was comprised of tax expenditures?
By promising easily understood and familiar but expedient solutions, Democrats risk failing to convince the public that durable social policy reforms are needed and that fiscal policy is more than an afterthought.