- - Sunday, November 4, 2018

ANALYSIS/OPINION:

It’s fun to dress up on Halloween and pretend to be someone else, the more unlikely the costume the better. The prize for dressing up as the unlikeliest of all goes this year to Kamala Harris, the junior senator from California. With an eye on 2020, and having discovered that millions of Americans are having difficulty paying their taxes and maintaining a comfortable standard of living, she pretends to be Donald Trump the tax-cutter. Just as the ghosts and goblins were gathering for their annual blow-out she introduced something called the Lift the Middle Class Act, providing a tax credit of up to $6,000 to families earning less than $100,000 annually.

Individuals making less than $50,000 would be eligible for up to $3,000 a year. A million college students would be put in line for the $3,000 annual benefit. Democratic colleagues have made similar proposals this year.

“Middle class families deserve to know that one unexpected cost won’t lead to a financial emergency,” Mrs. Harris says. “The Lift the Middle Class Act that I introduced would help address the rising costs of housing, tuition, childcare, and more.” She cites a 2017 Bankrate.com study finding that 57 percent of American families don’t have $500 in reserve for an unexpected expense. She omitted one crucial bit of information, the cost of her scheme.

If half of the approximately 150 million U.S. workers were to receive the proposed tax break, and another million Pell Grant-eligible students are included, as the senator promises, the loss to the Treasury could surpass a trillion dollars annually. A trillion dollars is a lot of money. For comparison, total tax revenue from individuals in fiscal 2018 was $1.7 trillion. Since tax credits reduce tax liability dollar for dollar, the $6,000 saved in her scheme could result in a federal budget shortfall that makes the $779 billion deficit from President Trump’s tax cuts this year feel like mere pocket change.

“Americans are working harder than ever,” she rightly says, “but stagnant wages mean they can’t keep up with cost of living increases.” Her tax-credit proposal shares similarity with the concept of guaranteed basic income, which uses public funds to pay residents a monthly stipend. Her constituents in Stockton, for instance, will receive a $500 a month municipal benefit next year.

The American economy is expanding at a 4 percent rate, thanks to the Trump tax cuts. Wages have not yet matched that, rising only 0.5 percent during the past year, but the reduced tax rates are expected to boost the average household’s income by another 2.2 percent. Taken together, an increase in family earnings of 2.7 percent would beat this year’s rise in the consumer price index of 2.3 percent.

It’s a characteristic of the human condition that prosperity breeds profligacy, and there is no assurance that Americans would save for emergencies the $500 monthly benefit the Lift Act would pay out. More likely is that the extra cash would go for incidentals, like the $30 billion Americans spend every year on beer and potato chips. The same weakness for goodies was on display when Congress spent an extra $14.7 billion in fiscal 2018 for such congressional incidentals as a $663,000 brown tree snake eradication program in the South Pacific.

This is not the first time that Mrs. Harris has attempted to game the tax system to for such goodies. In July she introduced the Rent Relief Act, which would provide a refundable tax credit for those making less than $100,000 and spending at least 30 percent of their income on rent, including utilities. The credit would vary based on family size, and the income ceiling would rise to $125,000 in more expensive cities.

Lower taxes are a boon to everyone, but we can see through the senator’s Halloween masquerade. Coming from California, with the nation’s highest state income tax of 13.3 percent, she won’t really be mistaken for a Trump-like tax-cutter.

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