Joe Biden and Kamala Harris have tax plans to cut poverty in half - Vox

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Joe Biden and Kamala Harris have an opportunity to cut poverty in America in half. A new study finds that the Democratic ticket has put forward or endorsed a set of proposals that, taken together, could add up to the biggest anti-poverty plan in decades.

Three specific measures — Biden's plan to make Section 8 housing vouchers universal; congressional Democrats' plan for a $3,000-a-year child allowance ($3,600 for kids under 6), and Harris's LIFT Act proposing new tax credits for low-income households — would have lowered the poverty rate from 12.7 percent to 6.5 percent if they had been adopted in 2018, according to researchers at the Center on Poverty and Social Policy at Columbia. That's 20.2 million fewer people living in poverty.

The reduction in child poverty would be larger still, from 13.7 percent to 3.6 percent. Only about a quarter as many children would remain in poverty after the policy package's adoption.

The Columbia team — Sophie Collyer, Megan Curran, Katherine Friedman, Robert Paul Hartley, David Harris, Andrew Hinton, and Christopher Wimer — modeled the effects of these policies in 2018, rather than 2021, to get around the immense uncertainty we face about economic conditions following the coronavirus recession. It's not clear how deep or long-lasting the downturn will be, or what time-limited policies Congress and President Donald Trump will adopt to combat it, which makes getting a baseline estimate of poverty in 2021 difficult or impossible. For that reason, they used 2018 as a baseline "normal" year, to measure the permanent effects of poverty alleviation policies that would be adopted on a permanent basis.

In a way, though, this analytical choice might underrate the potential of the Biden presidency to reduce poverty. The CARES Act, Congress's first economic stimulus response to the Covid-19 crisis, had a profound impact on poverty. Wimer, Zachary Parolin, and Megan A. Curran found that, despite the Covid-driven economic crash this spring, poverty only rose from 12.5 to 12.7 percent from 2019 and 2020, where it would've spiked to 16.3 percent absent CARES. Meanwhile, Bruce Meyer and Jeehoon Han of the University of Chicago and James X. Sullivan of Notre Dame found poverty actually fell after Covid-19 hit due to CARES.

The HEROES Act, the House Democrats' relief package meant to extend CARES, likely would have had a similar effect if passed (the Senate hasn't taken it up), and even included the child benefit proposal analyzed above as one of its provisions. Harris has proposed a $2,000-per-month, per-person basic income for the duration of the crisis, which would do even more. If you layer the poverty reduction proposals analyzed here on top of those emergency measures, the net effect on poverty could be even greater.

Of course, there is no guarantee that the Biden-Harris administration would prioritize these policies; they would likely require extensive outside pressure to make poverty reduction a priority early in their time in office. But one important thing to note is that, provided the Democrats take the Senate, they can pass these anti-poverty measures without having to overcome the filibuster.

All these plans can be passed through the budget reconciliation process, without fiddling with the filibuster rules at all. A guaranteed child benefit already has near-unanimous support in the Democratic caucus: 38 of 47 Senate Democrats have sponsored or co-sponsored it, as have 187 of 232 House Democrats. With Biden and Harris's lobbying, universal housing vouchers and the LIFT Act could attain similar levels of support within the party.

If the Biden-Harris agenda doesn't muster enough Democratic support, there is an alternate anti-poverty path that likely could win over enough of the caucus centered around a more modest boost to the child tax credit and earned income tax credit. That bill, the Working Families Tax Relief Act, has the support of pretty much the entire Senate Democratic caucus. (More details on this below.) Its impact on poverty would be milder, but it would still be consequential.

In other words, if the Democrats take back control of Washington, they have an opportunity to really strike a blow against poverty and lift up millions of Americans.

"Over a 50-year period, we saw government policies cut the poverty rate in the United States by 40 percent," Collyer, the research director for the Center on Poverty and Social Policy, says. "Our results show that if the housing and tax policies that we studied were enacted together, they could cut the poverty rate by nearly half. This combination could match or even exceed what government policies and programs have accomplished over the past 50 years."

How the anti-poverty plans would work

Vox has previously analyzed the effects of the LIFT Act and the child benefit here, and universal housing vouchers here. What's unique in this analysis is the consideration of all three of them together, as a comprehensive approach to fighting poverty.

As in their previous work, the researchers use the supplemental poverty measure — a more accurate metric the Census Bureau releases as an alternative to the official poverty measure — as their baseline. The plans being compared in the charts that follow are the Biden-Harris plans (Combination 1) and an alternative, less ambitious set of proposals centered on the Working Families Tax Relief Act (Combination 2).

Beyond the effects on overall and child poverty (cut in half and by nearly three-quarters, respectively), the policy package analyzed here would have a substantial effect on deep poverty, defined as the share of people living on less than half the poverty threshold. Overall deep poverty would fall by nearly half, from 4.1 percent of the population (13.4 million people) to 2.4 percent (7.8 million), lifting 5.7 million people out. The effects on deep poverty among children are even greater: It would fall from 3.3 percent (2.4 million children) to 0.8 percent (just under 600,000). In a stroke, the most extreme forms of material deprivation among American children would fall by three-quarters.

To understand why Biden and Harris have the opportunity to cut poverty so dramatically, it's worth breaking down the policies that make up the policy package, one by one.

A child benefit of at least $250 per month for all but the richest families

The leading child benefit plan in the Democratic Party is called the American Family Act, from Sens. Michael Bennet (D-CO) and Sherrod Brown (D-OH) and Reps. Rosa DeLauro (D-CT) and Suzan DelBene (D-WA). The AFA, and the version of it that Biden has endorsed to run through "the duration of the crisis," would dramatically expand the child tax credit (CTC), which currently offers up to $2,000 a year for families with significant earnings but little or nothing for many poor people.

The child credit is currently stingy for poor people because households have to earn at least $2,500 per year for the credit to be "refundable," or for it to count for households that don't have a positive tax liability. An American without any taxable income — say, a single mom with a kid who lives with family but doesn't have a job because of the recession or some other barrier — won't owe any taxes, but because their income falls below that $2,500-a-year threshold, they don't get any benefit from the current CTC.

The problem is more severe than that, though, because even above $2,500 per year, the credit phases in slowly, at a rate of 15 percent. A parent has to earn at least $11,833.33 to qualify for the full refundable credit, a bar that the poorest households can't meet.

The Biden proposal would expand the size of the child credit and make it fully available for all poor people regardless of earnings. The benefits would be:

• $3,000 per year, or $250 per month, per child ages 6 to 17 (changing the current law, which excludes 17-year-olds)
• $3,600 per year, or $300 per month, per child ages 0 to 5

The benefits would be available monthly, in advance, the Biden campaign says, so families could pace out their spending and smooth their incomes. Because the CTC is currently paid out through tax refunds, it sometimes leads to a perverse situation in which families use it to pay down debt they never would've had to incur if they'd gotten the money earlier.

Another difference between the AFA and Biden's version is that the former would also reduce eligibility for the credit for high-income households, but the latter would not. Under present-day law, and under Biden's proposal, the credit begins phasing out for singles with incomes above $200,000 and couples with incomes above $400,000; under the AFA, phaseout would begin above $130,000 a year in income for single parents and $180,000 for married couples.

Above and beyond its effects on poverty, the plan would result in a huge increase in monthly income, especially when people's kids are young and need diapers, cribs, strollers, and new clothes to replace quickly outgrown old ones, and often need paid child care before kindergarten starts. The policy would give an average of $2,260 per year more to American families with children than current policy, per the Urban Institute's Elaine Maag.

A child allowance — the catchall term for policies like Biden's proposed CTC that offer a set cash subsidy to all or most parents — or similar policy exists in almost every EU country, as well as in Canada and Australia. In many countries, the payments are truly universal; you get the money no matter how much you earn. In others, like Canada, the payments phase out for top earners, but almost everyone else benefits. This version is what Biden's proposing.

The LIFT Act would enhance the earned income tax credit

The LIFT Act, proposed by Kamala Harris in 2018 as she prepared for her presidential run (and which became a centerpiece of that campaign as her signature "middle-class tax cut"), is essentially a massive expansion of the earned income tax credit. The EITC is one of the largest anti-poverty programs in the US, and offers cash to low-income people (particularly those with kids) who work.

The LIFT Act would add another credit on top of the EITC, which would make the overall policy more generous to everyone and especially to childless adults, whose current maximum EITC is only $538 compared to $5,920 for families with two kids.

Like the EITC, the LIFT Act is structured like a trapezoid: Benefits rise as low-income people make more money, and then decline above a certain threshold to reduce benefits to higher earners, as the following diagram from Maag shows:

Christina Animashaun/Vox

If you earn $0, you get $0 in benefit. But then it phases in very rapidly, dollar for dollar. If you're a single person and make $1,000 a year, you get an additional $1,000 from the LIFT Act. If you make $2,000, you get another $2,000. It then caps out at $3,000 for individuals and $6,000 for couples.

The phaseout is much milder, with middle- and upper-middle-class families and individuals losing only 15 cents for every $1 their income grows after the phaseout starts (at $30,000 for individuals without kids, $60,000 for married couples, and $80,000 for single people with kids).

The LIFT Act would solve a couple of big problems with our existing system. First, it would extend the value of the EITC, which phases out entirely for families after they reach $39,000 to $49,000 in earnings (it depends on how many kids they have), to higher-income middle-class families. That makes it less of a pure anti-poverty program, but it helps non-poor but still struggling families who could use some assistance, and whose support helps ensure the program's political survival in the future.

Second, as mentioned above, neither the EITC nor (obviously) the child tax credit does much of anything for workers without kids. The LIFT Act would correct that.

There are a few improvements one might want to make to the LIFT Act. Rep. Rashida Tlaib (D-MI) has proposed a variant called the BOOST Act that's mostly identical but does not phase in with income: A single person with $0 in earnings would get the $3,000 annually. It would still phase out for high earners. Tlaib's variant would cost more and eliminate any work incentive effects of the EITC (insofar as they exist) but also does more to reduce poverty.

The LIFT Act could also be restructured to reform, rather than exist on top of, the EITC. In Harris's plan, workers would have to file for both, which could increase complexity, especially since the EITC depends on the number of kids one has and LIFT doesn't.

A simpler option would be to follow the Economic Security Project's Cost-of-Living Refund plan, which replaces the EITC entirely with a $4,000 maximum credit for singles and $8,000 for couples. That would make a few couples with kids worse off than they are currently — unless you pair it with the American Family Act, described above. But it would also clarify the purpose of the EITC, which currently functions both as a subsidy for children and as a wage subsidy, by making it more plainly the latter, and consigning to the child tax credit the task of supporting families with kids.

Section 8 for all

The Housing Choice Voucher program, colloquially known as "Section 8" because it's authorized by Section 8 of the US Housing Act, is the main way the federal government subsidizes rent for low-income people. But vastly fewer people receive benefits from the program than are eligible, based on their income. To be eligible, households must count as "low income," defined as living on 80 percent or less of the local median income, and only about a quarter of people in that situation receive benefits.

That's because housing vouchers are a discretionary, not entitlement, program; while food stamps and Medicaid go to everyone who's eligible, housing vouchers are administered by local housing authorities that receive money from the federal government. When they run out of money, those housing authorities stop adding new beneficiaries, and set up waitlists that generally last years. Demand is so high that most authorities have closed their waitlists and aren't adding newly needy households.

That's not the only limitation of the program — many landlords also discriminate against housing voucher beneficiaries— but it's by far the biggest one, and it keeps the voucher program from being reliable for most low-income people.

So Biden, building on ideas from low-income housing groups and academics like Princeton's Matthew Desmond, has proposed making housing vouchers an entitlement: that is, the federal government would fund the program adequately such that all eligible people get assistance.

As Vox's Matt Yglesias explained in his piece on Biden's plan, we should expect this to have a variety of positive effects on outcomes from housing instability to domestic violence. Multiple randomized studies have found that housing vouchers are the most effective way we know to reduce homelessness; in one experiment, voucher receipt reduced homelessness among low-income participants by three-quarters.

This, obviously, makes sense: Most people aren't homeless out of preference; they're homeless because they cannot afford rent. It is hard to predict how dramatically Biden's housing voucher policy would reduce homelessness, and the Columbia numbers cannot estimate its effects there, but the consequences are likely to be substantial.

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A more modest option

The above policy package is rooted in policies that Biden or Harris have endorsed. But it's possible that Biden will either be more timid in his approach to safety net legislation, or that moderate Democratic senators like Joe Manchin (D-WV) or Kyrsten Sinema (D-AZ) will balk at policies as generous as the above as too costly.

So I asked the Columbia researchers to analyze another policy package as well. In this package, the housing voucher proposal outlined above, which Biden has endorsed, is paired with a bill called the Working Families Tax Relief Act (WFTRA). This bill, unveiled last year by Sens. Sherrod Brown (D-OH), Michael Bennet (D-CO), Dick Durbin (D-IL), and Ron Wyden (D-OR), is essentially a compromised expansion of the child tax credit and the earned income tax credit that doesn't go as far as the American Families Act and LIFT Act described above.

The CTC would be made fully refundable — the most valuable part of the AFA for poor kids — but the size would remain at $2,000 a year for kids 6 and up and be raised to $3,000 for kids under 6, as opposed to $3,000/$3,600 under the AFA. Additionally, the bill would quadruple the maximum EITC for childless adults; in 2019, that would have meant boosting it from $529 to $2,074. Single working adults ages 19 to 24 and 66/67 would be newly able to file for the EITC. The bill would also have the credit phase in faster, and increase the maximum credit a bit (15 to 25 percent, so much less than the quadrupling for childless adults) for families with children. Finally, the bill would revive the personal exemption for dependents, which the 2017 tax bill eliminated in exchange for increasing the child tax credit.

In each dimension, the WFTRA is a less generous version of the AFA/LIFT combination evaluated above. Harris's LIFT Act would have increased the maximum childless EITC in 2019 from $529 to $3,529; the WFTRA would've only increased it to $2,074. Bennet and Brown's AFA would increase the maximum child credit for young kids to $3,600; WFTRA would only increase it to $3,000.

But the flip side is that WFTRA has almost universal support in the party, which LIFT especially does not. The WFTRA has support from literally every Senate Democrat except Sinema. It should easily pass the body even if LIFT could not.

While not as effective as the main package analyzed here, WFTRA plus universal vouchers would still do a lot to reduce poverty, child poverty, and deep poverty. Overall poverty would fall from 12.7 percent to 8.2 percent, lifting 14.9 million people out. Child poverty would fall by more than half, from 13.7 percent to 5.7 percent. Deep poverty would fall from 4.1 percent to 2.7 percent (lifting 4.8 million people out), and deep child poverty would fall by two-thirds, from 3.3 percent to 1.1 percent.

The big question mark with this plan is whether universal housing vouchers, as proposed by Biden, would win the easy assent of House and Senate Democrats that WFTRA has. But during a historically deep and devastating downturn in which millions have fallen behind on their rent or mortgages, housing assistance might be more popular now than ever before.

The bigger point, whichever package Democrats decide they prefer, is that the tools and policies exist, in the Democratic coalition, for a truly massive reduction in poverty. This opportunity existed before Covid-19, but the pandemic and associated economic collapse have only made the case more pressing. This historic crisis would be a terrible thing to waste.