It’s been a week for tax ideas with potentially hefty price tags.
A plan from Senator Kamala Harris, a California Democrat regarded as a possible 2020 presidential candidate, would cost $2.8 trillion over a decade, the conservative Tax Foundation said Wednesday. Harris’s proposal would provide a tax credit or direct payment to middle-class and poor individuals and families.
Shortly after Harris introduced her plan last week, President Donald Trump floated the idea of a 10 percent middle-class tax cut, catching members of his party and administration off guard. The effort -- seen as a campaign tactic ahead of the midterm elections -- could cost from $410 billion to more than $2 trillion, depending how it’s designed, according to an analysis of data from the Joint Committee on Taxation and Congressional Budget Office.
The Tax Foundation score of Harris’s proposal accounts for some slowing down of the economy as a result of the plan, but doesn’t factor in any tax increases Harris is proposing to offset the cost. The Democrat has said parts of the plan would be paid for by rolling back unspecified provisions in the GOP’s 2017 tax law that don’t benefit those making less than $100,000, and by imposing a tax on banks with more than $50 billion in assets.
The conservative think tank said those proposals were too vague to be included in their assessment of the plan. The Tax Foundation’s cost estimate of Harris’s plan is slightly higher than the $200 billion annual cost -- or $2 trillion over a decade -- calculated by Meg Wiehe, the deputy director of the left-leaning Institute on Taxation and Economic Policy.
‘Small Economic Impact’
Republicans passed a $1.5 trillion tax cut last year that permanently slashed the corporate rate, temporarily cut individual rates, almost doubled the standard deduction and provided a special break for owners of partnerships and limited liability companies.
The House approved legislation earlier this year that would make the tax changes for individuals permanent, which would cost an estimated $630 billion over a decade, according to the nonpartisan Joint Committee on Taxation.
The Harris plan would cause more than 825,000 jobs to disappear over 10 years and a 0.7 percent dip in gross domestic product, according to the Tax Foundation analysis. Harris’s plan “has a very small economic impact,” said Kyle Pomerleau, an economist at the Tax Foundation. The job reduction would be due to the phasing out of the credit above certain income levels, which could impact individuals’ incentive to work.
LIFT Act