Moneybox

Kamala Harris’ Big Policy Idea Is Even Worse Than I Thought

Sen. Kamala Harris
What’s the big idea?
Drew Angerer/Getty Images

The early Democratic contenders for 2020 are easing into what you might call the big-think phase of their campaigns—floating expansive, blue-sky policy proposals that might potentially differentiate them in what will inevitably be a very crowded field. (Politico is calling this the wonk primary.) And so far, one of the biggest idea of all has come from California Sen. Kamala Harris, who proposed giving working class families up to $500 each month via a tax credit.

When Harris first debuted her plan, I had some qualms. But it turns out the bill has deeper problems than I initially realized that should make it a cautionary example for Democrats crafting their platforms.

First, a quick review of Harris’s bill. The LIFT The Middle Class Act creates a refundable tax credit for workers—meaning that families can collect cash even if they don’t actually owe any taxes. It kicks in by matching each dollar an individual earns, before plateauing at $3,000 for singles and $6,000 for a married couple. The credit phases down at higher incomes, eventually dropping to zero for parents making $100,000 or more. Rather than waiting for their tax refund at the end of the year, taxpayers can choose to take the payment each month. (Importantly, childless workers can get it too, but credit drops in value sooner for them).

Long story short: Couples who make less than six figures can get up to a $500 check in the mail each month.

And here it all is in picture form. Look at those trapezoids.

A chart that shows the tax credit rising up to 6,000 for couples, then progressively falling as income level reaches $100,000.

This bill would put a lot of money into the hands of working families, and lift millions out of poverty. So what’s wrong with it? Last month, I noted three issues: First, it’s extremely similar to a program that already exists—the Earned Income Tax Credit—and it’s not clear why you’d want to add even more complexity to our hard-to-navigate welfare state by creating a totally new benefit rather than modernize and expand the one that already exists. Second, because only workers (and some college students) receive the bill’s benefits, it offers nothing to the absolute poorest Americans—those who don’t have jobs. At the same time, it give zilch to families who make more than $100,000. And whether or not you think those households—which make up about 29 percent of the country—need any help, that fact alone will probably undercut its political support.

Which is a problem, since a program this expensive would be an enormous political lift. Harris’s office did not score the bill before circulating it (which seemed like a bit of a gamble). But since then, the University of Pennsylvania’s Penn Wharton Budget Model has concluded it would cost $3.1 trillion over a decade. The conservative Tax Foundation estimates it would be slightly cheaper: $2.8 trillion. Either way, you’re talking about a big, fat chunk of federal change. If one were to total up all of the money that Washington is expected to spend on Obamacare’s private insurance subsidies, the Children’s Health Insurance Program, and the Social Security Disability Insurance program over the next ten years, that only gets you to $2.7 trillion.

As a couple of anti-poverty experts pointed out to me, the LIFT Act also contains a fairly serious design flaw. As it’s currently written, the bill creates a serious financial penalty for getting married.

Consider a couple with one child, where each partner makes $60,000. If they were married, they wouldn’t qualify for the LIFT credit at all. If they just lived together, however, one partner could file her taxes as the head of the household, claiming the child, and collect $3,000. The other would file his taxes as single, and get no money from the credit.

End result: Married couple gets nothing. Cohabitating couple gets $3,000. You can play around more with the income combinations and come up with combos where getting hitched costs a couple a full $6,000 per year.

Marriage penalties have long been a problem in our tax code. But policy makers generally try to avoid them as much as possible, since as a rule they prefer not to disincentivize loving couples from tying the knot. When I asked Harris’ office about this issue, they told me that the bill still isn’t final yet and that they’re continuing to look at ways to improve it. (The office has circulated a full draft of the legislative language to journalists and think tanks, but hasn’t introduced it in Congress yet). Though it could require making the package more expensive, it’s certainly conceivable they could do some tinkering and fix, or at least minimize, the marriage penalty.

Still, consider the issues with the legislation so far:

• It’s complicated.
• It’s extremely expensive.
• It doesn’t help the poorest of the poor.
• It doesn’t help the upper-middle class.
• And it penalizes married couples, which means it violates social policy making 101.

On top of all that, there’s the question of who would pay for it. The draft bill includes a “sense of the Senate” section that suggests trying to cover the cost, in part, by repealing Trump’s tax cuts, with the exception of any sections “that provide relief to taxpayers with less than $100,000 in income.” Harris’ office told me the section is only meant to be a “conversation starter,” but it sounds like we’re talking about raising taxes on a bunch families that make less than $200,000 a year, without offering them anything in return.

It’s hard to imagine how a bill like this would ever fly on Capitol Hill. Which is fine. It’s just a trial balloon from an unofficial presidential candidate months before the actual campaign would get underway. There should be no real harm in floating a slightly clumsy idea.

But I think it’s worth pondering the problems with the LIFT Act, because it illustrates a trap lots of Democrats could fall into if they’re not careful as they craft their policy platforms. At the risk of stuffing everything back into the frame of the 2016 election: Harris is trying to appear bold by spending like she’s Bernie Sanders, while designing her legislation like a Hillary Clinton-style technocrat (minus the technocratic precision). And it’s a very awkward combination.

Bernie Sanders’s platform was defined by massive social spending programs with universal benefits—free college for all, single payer healthcare, and so forth. The upside: He offered something for everybody, and inspired the left with a clear vision of a European-style welfare state. The downside? He got criticized by pundits and some voters for being unrealistic, in part because his ideas were really, really expensive. Hillary Clinton’s platform was progressive, but comparatively restrained. She preferred mid-sized to large initiatives with means tested benefits, like expanding the Affordable Care Act and tuition free college for families earning less than $125,000. The upside? Pundits gave her credit for being realistic and carefully wonky. The downside: Her platform was dull and lacked a clear vision. People remember what Sanders economic program stood for. Nobody remembers Hillary’s 10-point policy plans.

Harris is going for a synthesis of sorts. The price tag of the LIFT Act is Sanders-esque. But the basic design is Clintonian. Unlike a universal basic income or child allowance, it’s means tested—so benefits won’t get “wasted” on wealthier households. It’s tied to work—so conservatives might have a harder time criticizing it as a handout. And it’s similar to things we’ve tried before (the Earned Income Tax Credit). It’s seemingly meant to solve Hillary’s vision problem—it is crystal clear that Harris wants to give middle class Americans lots and lots of money—while still getting credit for thoughtfulness.

One problem with this approach is that it’s technically hard to pull off. Means tested benefit programs with complicated phase-ins and phase-outs can create weird, harmful incentives like marriage penalties. The more money involved, the more the problems become magnified, and the more expensive they become to fix.

A second problem is more conceptual: Medium-bore, technocratic policy ideas don’t always scale well. Again, Harris borrows much of her template largely from the Earned Income Tax Credit, which has been very successful at reducing poverty without attracting the ire of Republicans. That’s because it only benefits workers , costs about $70 billion per year, and operates through the tax code, where it’s mostly invisible to voters and thus hard to single out for attacks. While the LIFT Act is also aimed at workers, it’s also very expensive and meant to be highly visible. The attack ad practically writes itself: “Kamala Harris wants to raise your taxes so she can give money to lazy people [insert images of vulnerable ethnic minorities] who can’t be bothered to work full time.”

And that points to the third issue, which is pure politics. It’s just not clear that a proposal to spend gobs of on money on some Americans is really going to be more politically popular than a proposal that spends gobs of money on all Americans. Moderate pundits will still gawk at the price tag of Harris’ bill, and Republicans will certainly try to attack it as a newfangled take on welfare. But tying its benefits to work could alienate left-wing activists, while means testing them could turn off the upper-middle-class. Rather than getting the best of Bernie and Hillary, in other words, combining their policy styles could give you the worst of both.