The LIFT Credit

Senator Kamala Harris (D-CA) recently introduced a plan to create yet another unaffordable federal entitlement program that would drastically increase Americans’ reliance on welfare and discourage work and independence for America’s middle class. The LIFT (Livable Incomes for Families Today) the Middle Class Act would provide an annual subsidy of up to $6,000 per family for all households earning under $100,000 per year and up to $3,000 for single filers earning under $50,000 per year. This subsidy could be dispersed at the end of the year or in monthly installments.

The LIFT Credit Would Bust the Federal Budget

Expert analysis demonstrates that this proposal is unsustainable. Independent analysis by the Tax Foundation estimates the static cost of this proposal to be $2.7 trillion over ten years.[1] To finance this program, net interest payments would also increase by $478 billion over the same period, bringing the total added taxpayer burden to a cautious estimate of $3.2 trillion.[2] [3]

A second independent analysis by the Penn Wharton Budget Model (PWBM) estimates the static cost of the proposal to be closer to $3.1 trillion over the budget window.[4] Associated net interest payment increases would run over $532 billion,[5] bringing the total cost under this model to $3.6 trillion.

The LIFT Credit is Unworkable

The LIFT credit purports to help low- and middle-class Americans. In reality, however, it would cost jobs and bust the federal budget by funneling Americans into a massively expanded welfare system. The proposal would encourage reliance on a monthly welfare check for families that make over 600 percent of the federal poverty threshold.[6] This has another negative effect—translating to higher marginal tax rates for some, according to PWBM. These higher tax rates would further reduce incentives to work for many families trying to avoid higher taxes.

Further, the LIFT credit would dramatically shrink the labor force. The Tax Foundation determined the implementation of this proposal’s subsidies would cost nearly 830,000 jobs and have the effect of reducing gross domestic production (GDP) by 0.7 percent. Such impacts would disproportionately affect middle class Americans—those traditionally hurt most by a shrinking labor force and a condensing economy. Ultimately, this misguided Democrat plan to help American workers is a simple wealth transfer. Rather than increasing post-tax paychecks and encouraging economic growth, this proposal would eliminate jobs and increase government-dependence.

Republican Solutions for Lifting Americans Out of Poverty 

Americans should not have to rely on the Federal Government for their livelihood. Rather, the government should remove regulatory barriers stifling job creation, encourage work, and support Americans by allowing them to keep more of their hard-earned money. This is precisely the record of the Tax Cuts and Jobs Act of 2017,[7] which resulted in the projected creation of approximately a million jobs and a 0.7 percent boost in GDP over the next decade.[8] Republicans will continue to support pro-growth policies to create jobs, grow the economy, and ensure that America’s middle-class continues to thrive.

 

[1] Kyle Pomerleau, Tax Foundation, “Analysis of Senator Kamala Harris’s “LIFT the Middle-Class Act”,” October 24, 2018, https://taxfoundation.org/senator-harris-lift-middle-class-act-analysis/.

[2] Calculated by House Budget Committee Majority Staff using CBO’s April 2018 Baseline and implicit interest rates.

[3] All estimates are based on available data. Legislative text has not yet been released

[4] John Ricco and Richard Prisinzano, Penn Wharton Budget Model, University of Pennsylvania, “Analyzing the Budgetary and Incentive Effects of Senator Kamala Harris’s Proposed LIFT Act,” October 25, 2018, http://budgetmodel.wharton.upenn.edu/issues/2018/10/25/analyzing-the-budgetary-and-incentive-effects-of-senator-harriss-proposed-lift-credit.

[5] Calculated by House Budget Committee Majority Staff using CBO’s April 2018 Baseline and implicit interest rates.

[6] The 2018 federal poverty threshold for a married couple that would be eligible for the $100,000 earnings limit is $16,460.

[7] Tax Cuts and Jobs Act of 2017, Pub. L. No. 115-97, 131 Stat. 2239 (2017).

[8] Congressional Budget Office, Budget and Economic Outlook: 2018 to 2028, April 9, 2018, https://www.cbo.gov/publication/53651, with supplemental correction issued April 17, 2018.

 

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