The 2017 tax reform legislation suspended the personal exemption for tax years beginning after 2017 and before 2026, and expanded the child tax credit in an effort to provide some additional assistance to lower and middle class families with children.
Many felt that the expanded child tax credit did not do enough to help lower income taxpayers, and that the overall tax reform package was skewed toward providing tax cuts for the rich. Possibly in response to this perceived unfairness, one California Democratic Senator has proposed a new tax credit, named Livable Income for Families Today (or LIFT) designed to help lower and middle class taxpayers regardless of whether they have children. The new credit is part of a proposal entitled LIFT the Middle Class Act, which was introduced late in 2018.
We asked Professors Robert Bloink and William Byrnes, who are affiliated with ALM’s Tax Facts, and hold opposing political viewpoints, to share their opinions about how the new credit might work, and whether it would be a positive impact for taxpayers in general.
Below is a summary of the debate that ensued between the two professors.
Bloink: This new credit is a step in the right direction toward providing equal tax benefits for taxpayers regardless of whether they have children, and actually provides a benefit to the people who need it the most. The 2017 tax reform overhaul was dramatically skewed toward providing additional financial benefits for wealthy taxpayers, and this credit would provide much needed relief for the middle class.
Byrnes: The new LIFT credit is unlikely to pass, because it would be extremely expensive to implement. It’s just unworkable, and also unnecessary because we already have tax credits designed to do exactly what this credit purports to do—the earned income tax credit and the child tax credit, both of which remained intact or were even expanded to help the middle class under the 2017 tax reform legislation.
Bloink: The EITC and child tax credit don’t do enough to help the middle class. It’s important to remember that a parent can usually only claim the child tax credit if that parent is the child’s custodial parent—the LIFT credit is available regardless of whether the taxpayer has children at all, so a noncustodial parent or taxpayer who has chosen not to have children would also be entitled to claim the credit.
Byrnes: But you have to look at the terms of the LIFT credit itself. It essentially provides a disincentive for taxpayers to earn additional income, because it phases out—increasing the taxes paid by those in the phase out range, therefore incentivizing taxpayers to remain below those limits. We already have the EITC, and I don’t see how this new credit adds any value to the tax code.
Bloink: The LIFT credit is different from the EITC—for one, it could provide benefits to taxpayers on a monthly basis, to give real assistance where it’s needed throughout the year, and help lower income taxpayers get some stability into their finances. Professor Byrnes’ argument that this credit provides a work disincentive is just a distraction technique, you can make that argument about almost any provision in the tax code designed to help lower income taxpayers. And we certainly provide plenty of tax loopholes and incentives for the rich.
Byrnes: The fact that this credit can be claimed on a monthly basis makes it even worse! It’s just another welfare-like incentive designed to allow and encourage lower income taxpayers to avoid actually earning a living, because they can instead rely on the government for support.
— More Bloink & Byrnes Go Thumb to Thumb: