In a recent analysis from the Tax Policy Center (TPC), proposals by Democratic presidential candidate and U.S. Vice President Kamala Harris for three significant tax credits were evaluated for their potential economic impact over the next decade. These credits, aimed at families with children, low-income workers, and first-time homebuyers, are projected to reduce federal tax revenues by $2 trillion. Despite this substantial cost, TPC asserts that the benefits would predominantly extend to low- and middle-income households. They estimate that over 70 percent of households earning approximately $113,000 or less would receive support through at least one of these tax credits.
Harris’s tax plan primarily consists of enhancing the Child Tax Credit (CTC) by expanding eligibility to more very low-income families and increasing the maximum credit from $2,000 to as high as $6,000 per child. Additionally, her proposal includes an expansion of the Earned Income Tax Credit (EITC), particularly for workers without children living with them, and a refundable tax credit aimed at first-time homebuyers worth up to $25,000. The TPC modeled these proposals to assess their financial implications, noting that Harris’s homebuyer subsidy could potentially be structured as a cash grant, although the Biden Administration’s budget for 2025 suggests utilizing a tax credit format.
When evaluating the costs associated with these tax credits, the TPC identified Harris’s CTC expansion as the most substantial, estimating it will reduce tax revenues by nearly $1.6 trillion over the next decade. The EITC expansion is expected to cost around $140 billion, while the homebuyer tax credit could reduce revenues by approximately $300 billion. The eventual cost of the homebuyer credit could rise significantly should it stimulate further demand in the housing market by encouraging more first-time homeowners.
From a distributional perspective, Harris’s proposals seem to be most beneficial to the lowest income households. Those earning about $33,000 or less could see their after-tax incomes increase by an average of 3.6 percent, translating to an approximate $700 rise for these families in 2025. Conversely, while higher income brackets could experience minor benefits, the top 20 percent of earners would see average tax cuts amount to just 0.1 percent, around $350, with no observable benefits for the top 1 percent. The targeted nature of these tax cuts results in variations in benefit distribution even within income groups.
Among the lowest-income households, particularly families with children, a notable percentage would benefit from these tax credits. Approximately 36 percent of these households would qualify for an average tax cut of about $700. However, for households with children, the percentage qualifying soars to over three-quarters, with an average tax cut of $2,800. In stark contrast, low-income older adults—generally less likely to have young children or be first-time homebuyers—would see similar benefits at a significantly lower rate, with only about 7 percent qualifying for an average tax cut of $150.
In summary, while Kamala Harris’s proposed tax credits represent a considerable reduction in federal tax revenue, they are strategically designed to provide substantial benefits to low- and middle-income households, particularly those with children. The analysis from the TPC underscores the progressive nature of these credits and their potential implications for income distribution across the American population. Despite the overall cost and limited benefits for high-income earners, the plan promises meaningful financial support for a significant portion of families in need.