Vice President and 2024 Democratic presidential candidate Kamala Harris speaks at a campaign event in Atlanta, Georgia, on July 30, 2024.
Elijah Nouvelage | Afp | Getty Images
“Building the middle class will be a defining goal of my presidency,” Vice President Kamala Harris said at a political event in Atlanta on Tuesday afternoon.
‘When our middle class is strong, Americans are strong,’ the de facto Democratic presidential nominee he told the crowd with more than 10,000 supporters.
“And to keep our middle class strong, families need relief from the high cost of living so they have a chance not just to get by, but to get ahead,” Harris added.
Here’s a look at how Harris might do that, based on the policies she supported during her first run for president in 2020 and as a senator.
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One of Harris’ signature bills as a senator — known as the LIFT the Middle Class Act, or Livable Incomes for Families Today — would provide an annual tax credit of up to $3,000 per person (or $6,000 per couple) for lower- and middle-income workers, plus of the benefits they already receive.
The size of the credit would amount to “significant tax relief,” according to the Committee for a Responsible Federal Budget.
The Harris campaign did not immediately respond to CNBC’s request for comment.
What the LIFT Act might look like today
Since the LIFT Act was first proposed in 2018, the cost of living has skyrocketed, hitting working-class Americans especially hard.
For these households, “real incomes have declined or remained flat due to inflation,” Thomas Phillipson, former chairman of the White House Council of Economic Advisers, told CNBC. That leaves many workers feeling less confident about their financial situation — and less satisfied with President Joe Biden’s handling of the economy.
At the same time, the rise of artificial intelligence has fueled fears about long-term job security.
Against this backdrop, “there’s a good case” for increasing the tax credit again for those below a certain income threshold, according to Laura Veldkamp, a professor of economics and finance at Columbia University Business School.
“A lot of people are asking, ‘Will AI take my job?’ There are people whose hard-earned skills could be obsolete,” he said. “One way to deal with that is to have more Social Security.”
But a tax credit like LIFT would also be extremely costly, according to the Tax Policy Center calculates from 2018 and 2019.
To help cover the tab for additional financial support, Harris at the time proposed repealing provisions of the Tax Cuts and Jobs Act for taxpayers earning more than $100,000.
But financing such a tax break now could be difficult amid growing concerns about the federal budget deficit. Harris will also have to deal with trillions in expiring tax cuts enacted by former President Donald Trump before 2025.
How the LIFT Act Could Support Renters
A version of the LIFT Act today may benefit renters the most, as many are part of the income bracket targeted by the tax credit, according to Francesco D’Acunto, associate professor of economics at Georgetown University.
D’Acunto and other experts suggest the LIFT Act may be a better help than that the 5% rent ceiling proposal. Biden was unveiled on July 16. That proposal calls on Congress to limit rent increases by landlords with 50 existing units or more to 5 percent or risk losing federal tax breaks.
Harris also supported the idea of rent caps at a campaign rally in Atlanta: “We’re going to stand up to corporate landlords and curb unfair rent increases.”
However, economists have found that such policies inadvertently reduce the available supply of rental units. And rent control policies could further affect an already relatively small supply, according in a Federal Reserve report published in February.
Rental vacancy rates, or the percentage of all units available for rent, measure the tightness of rental markets. The higher the vacancy rate, the easier it is to find housing, according to the Fed.
In 2021, the overall vacancy rate fell to 5.6%, the lowest level since 1984, the central bank found. Supply has since rebounded, falling to 6.6 percent in April, according to Census data through the Fed.
While the rent cap may lead consumers to believe prices won’t rise significantly, it could have negative side effects, such as landlords taking their properties out of the rental market, said Karl Widerquist, an economist and philosophy professor. at Georgetown University.
Additionally, landlords who lose those federal tax breaks will still be able to raise rents, said Jacob Channel, senior economist at LendingTree.
The advantage of the LIFT tax credit, D’Acunto said, is that it doesn’t create the same market distortions that a rent cap would. “But now on the tenant side, we’re helping them very directly to cover the impact of rent inflation,” he said.
Adds Widerquist: “Too often we give tax breaks to all homeowners in the name of making it more affordable for people to become homeowners, and we don’t give a similar tax break to people who pay rent. Those are the people who are struggling to become owners”.
The child tax credit is a “huge priority” for Democrats
LIFT was first proposed years before Congress temporarily extended the child tax credit during the Covid-19 pandemic, which could now be a higher priority, experts say.
The American Rescue Plan increased the child tax credit to $3,000 from $2,000, with an additional $600 for children under 6 for 2021, and families received up to half upfront through monthly payments. Harris described it changes to child tax credit as one of the “most important” and “most influential” pieces of legislation in a 2021 speech.
The child poverty rate fell to a record low 5.2% in 2021, largely because of the expansion, a Columbia University analysis found. Then, in 2022, the rate more than doubled to 12.4 percent after the pandemic relief ended, according to the U.S. Census Bureau.
“While the last government gave tax cuts to billionaires, we gave tax cuts to families through the child tax creditthat cut child poverty in America in half,” Harris said at a political event in North Carolina in late July, before Biden dropped out of the race.
of Biden budget for the financial year 2025 aimed to restore the child tax credit increase in 2021, and House lawmakers voted in January on a bipartisan tax package that included an extension of the child tax credit. The Senate has scheduled a procedural vote on the bill Thursday, which would force lawmakers to take a position on the issue before November.
Enhanced tax relief is “a huge priority for Democrats,” said Garrett Watson, senior policy analyst and director of modeling at the Tax Foundation.
But it’s unclear whether Harris, now the clear front-runner for the nomination, will renew calls for LIFT or focus on the child tax credit, which has a different design but a similar goal, he said.
“It’s very hard to say whether certain policy choices would be reconsidered from that long ago,” said Columbia Business School economics professor Brett House.
For now, “there are other cultural and political issues that are going to dominate.”
