Democrats unveil tax plan that, unlike GOP’s, would actually help working families
SEN. TAMMY BALDWIN, D-WIS., RIGHT, ACCOMPANIED BY, FROM LEFT, SENATE MINORITY LEADER CHUCK SCHUMER OF N.Y., SEN. DEBBIE STABENOW, D-MICH., AND SEN. BOB CASEY, D-PA., SPEAKS ON CAPITOL HILL IN WASHINGTON, WEDNESDAY, AUG. 2 CREDIT: (AP PHOTO/MANUEL BALCE CENETA)
Coming on the heels of the Republican tax plan, Sen. Tammy Baldwin (D-WI) and Sen. Cory Booker (D-NJ) have announced a tax reform plan of their own.
Their plan, called the Stronger Way Act, markets itself as “tax reform to reward work.” In contrast to the GOP tax plan, Booker and Baldwin’s plan doesn’t change the actual tax code, but rather uses the existing tax code to help working families.
“Tax reform needs to reward hard work, raise incomes and help working families keep more of what they earn. Too many people are being left behind by Washington and The Stronger Way Act starts helping them get ahead,” said Baldwin in a statement. “The Stronger Way Act offers tax reform to reward work and a new partnership to invest in local jobs programs that will help raise incomes for working families.”
At the center of their plan are two tax measures that would benefit lower and middle income families: expanding the Earned Income Tax Credit (EITC) and the Child Tax Credit.
An expansion of the EITC, a refundable tax credit that primarily benefits lower- to middle-income families, has been embraced at one point or another by both sides of the aisle. House Speaker Paul Ryan (R-WI) and former President Barack Obama both put forth plans that included increasing the EITC. Booker and Baldwin’s plan would allow workers with earnings above 50 percent of the poverty line to receive the maximum EITC. Their proposal suggests a single working mother of two with an income consistent with the poverty level could earn a tax credit increase of more that $2,200 under their plan. Additionally, a working married couple with three children on an income of $20,000 per year would earn a tax credit of of $3,500.
The Baldwin-Booker plan would also expand the EITC to workers without dependent children as a way to boost income for workers and to ensure they aren’t taxed into poverty. More than 20 million workers without dependent children would be affected by a EITC expansion. The duo estimates that a 30-year-old worker without dependents making roughly $12,500 a year currently receives an EITC of about $180.
The GOP tax plan, by contrast, raises the bottom tax rate to 12 percent, cuts the top rate to 35 percent, and also doubles the standard deduction. A recent analysis by the Tax Policy Center found that by 2018, this plan would allow taxpayers in the top 1 percent (which includes incomes of above $730,000), to receive roughly 53 percent of the total tax benefit and their after-tax income would increase an average of 8.5 percent. Meanwhile, taxpayers in the bottom 95 percent would see average after-tax incomes increase between 0.5 and 1.2 percent.
Bloomberg estimates that under the GOP tax plan that a middle-class couple with three kids would actually have to add $20,250 to their taxable income to make up for measures of their tax plan like the elimination of the personal exemption. That amounts to nearly double the “benefit” they would receive by a doubled standard deduction. It’s difficult, however, to determine the exact impact on a particular family because the plan lacks critical details, particularly the details that affect working families the most.
Both tax plans proposed by Republicans and Democrats tackle the Child Tax Credit, a refundable tax credit for those with children under the age of 17. The GOP plans to expand it by a “significant” amount, although it doesn’t specify by how much, although however much it is increased by won’t be refundable.
The Baldwin-Booker plan would increase the rate at which the credit kicks in and also ties the maximum credit amount (currently $1,000) to inflation, so the value isn’t marred by increase rent or food costs.
Another part of the Baldwin-Booker plan is aimed specifically at jobs — specifically, a transitional job program. The plan proposes the establishment of a jobs grant at the Department of Labor aimed at moving people out of poverty and into the workplace.
The Stronger Way Act plan comes a week after GOP leaders and Trump administration officials unveiled their “Unified Framework For Fixing Our Broken Tax Code” plan to repair the tax code and provide “massive tax cuts for the middle class.” As tax experts began analyzing how the specifics of the GOP plan would affect lower to middle income families, it became apparent that the plan is primarily a massive tax cut for the wealthy, the same group Trump promised not to provide cuts to.
The GOP tax plan is already finding itself in trouble. Deficit hawks like Sen. Bob Corker (R-TN) have expressed concerns over the plan, saying during a Senate Budget Committee hearing that “unless it reduces deficits and does not add to deficits with reasonable and responsible growth models, and unless we can make it permanent, I don’t have any interest in it.”
The plan is reported to cost a total of $5.5 trillion dollars.