By Dom Calicchio
Published November 25, 2018
Two Democrats in the U.S. Senate – both said to be eyeing the party’s 2020 presidential nomination -- recently announced so-called “basic income” plans for America’s lower-income families. A liberal publication, meanwhile, says neither plan goes far enough to aid families, and the government should instead just start “writing them checks.”
But the Heritage Foundation argues that such plans tend to fail, in part because they tend to remove the incentive for work.
In October, Sen. Kamala Harris, D-Calif., unveiled her LIFT the Middle Class Act. It would provide a tax credit of up to $6,000 a year to families earning less than $100,000 a year, and a credit of up to $3,000 for those earning less than $50,000 a year, the Washington Times reported.
“Middle class families deserve to know that one unexpected cost won’t lead to a financial emergency,” Harris tweeted last month, when the plan was unveiled. “The LIFT the Middle Class Act that I introduced would help address the rising costs of housing, tuition, childcare, and more.”
But the nonpartisan Tax Policy Center estimated earlier this month that Harris’s plan would add $2.8 trillion to the federal deficit over its first decade and another $3.4 billion over its second decade, the Washington Post reported.
Harris proposed paying for her plan by canceling parts of the Republican Party’s tax cuts and charging a new tax on banks and other financial institutions, the report said.
Meanwhile, Sen. Cory Booker, D-N.J., proposed last month the creation of “opportunity accounts” for the nation’s children, which could grow to about $46,000 per child by the time they turn 18, Business Insider reported.
“Today, nearly one in three American families have zero to negative wealth, and it’s hard to get ahead if you begin life behind the starting line,” Booker said of the plan, the Washington Times reported.
Watchdog.org estimated that Booker’s plan would cost American taxpayers at least $60 billion annually.
But liberal publication the Nation claims that both wealth distribution plans fall short.
“Harris’s plan suffers from two problems,” author Bryce Covert writes in the publication. “The first is who she leaves out. By matching only the income that poor families earn from work, it omits those who don’t earn anything.”
“Harris’s plan suffers from two problems. The first is who she leaves out. By matching only the income that poor families earn from work, it omits those who don’t earn anything.”
The second problem with Harris’s plan, he writes, “is that she still relies on giving money to families through the tax code, an opaque and complicated way of doing it.”
Covert then hails Booker’s plan for “sending money straight to the people who need it,” but says it “mistimes the assistance,” providing it when youths reach adulthood, “when most families are more economically stable.”
He suggests instead that both plans be set aside in favor of Russell Sage Foundation researchers’ suggestion that parents be sent “at least $250 a month for each child,” a plan estimated to cost U.S. taxpayers $190 billion per year.
“That’s still less than what’s been estimated for Harris’s plan,” Covert writes, “and less than the recent Republican tax cuts are likely to cost over the next three years.”
But the Heritage Foundation’s Vijay Menon wrote last month that plans similar to the recent liberal proposals have been tried before – only to fail.
Menon writes that a “negative income tax” experiment ran in six states from 1968 to 1980, and was documented by libertarian writer Charles Murray, author of “Losing Ground.”
“In ‘Losing Ground,’” Menon writes, “Murray concluded that the effect of the negative income tax on reducing work was ‘unambiguous and strong.’ ”
“If recipients lost their jobs during the experiment,” Menon notes, “they experienced significantly longer spells of unemployment compared with non-recipients — more than two months longer for husbands, almost a year longer for wives, and longer still for single mothers.”
In summary, Menon writes, such plans are “a misguided approach.”
“Policy should be designed to reward work, rather than replace it,” Menon writes. Therefore, a better alternative to a universal basic income would be to expand the earned income tax credit.”