A Democratic plan for big middle class tax breaks
But if you’re in the top 1% of earners — meaning you make at least $435,000 — you’d be footing the bill.
Representative Chris Van Hollen, the leading Democrat on the House Budget Committee, estimates his proposal would provide $1.2 trillion in tax cuts over a decade.
The plan, which is not part of any bill yet, has not been officially analyzed. But Van Hollen said his proposals wouldn’t add to the deficit because he would pay for them by curbing tax breaks for the rich and taxing financial trades.
Under his plan, the percentage of tax filers who end up owing no federal taxes would “almost certainly” increase, said Roberton Williams, a fellow at the Tax Policy Center.
But Van Hollen’s proposals have virtually no chance of becoming law in a Republican-controlled House and Senate.
“For Democrats, the calculation is strictly political,” Greg Valliere, chief political strategist for the Potomac Research Group, wrote in a note.
Here is some of what Van Hollen’s proposal would create:
A $1,000 paycheck bonus tax credit: This would provide every worker making up to $100,000 with a $1,000 tax credit — which would reduce their federal tax bill by $1,000.
A saver’s bonus: Any worker who saves at least $500 of his $1,000 tax credit would get an additional $250 to add to his savings.
A bigger child and dependent care credit: Parents who pay for child or dependent care would be able to take a larger credit. Today the maximum credit is between $1,200 and $1,800, depending on your income. Under Van Hollen’s proposal, you can get a credit up to $4,000.
A second-earner tax deduction: Two-earner couples with kids would receive a 20% tax deduction on up to $60,000 of income.
Van Hollen estimates that a couple making $90,000 — in which one spouse earns $60,000 and the other $30,000 — would save about $900 as a result.
His plan would also:
Encourage big employers to pay workers more: Van Hollen proposes a few ways to use the tax code to incentivize corporations to boost worker pay.
He would bar corporations from deducting CEO pay over $1 million unless they also provide workers with pay increases in line with worker productivity and inflation. Big companies would also not be able to take the deduction if they lay off workers in a given tax year.
Limit the tax breaks for the rich: The top 1% of earners and the wealthiest U.S. households would benefit less from tax deductions and exemptions.
Van Hollen didn’t specify just how much he’d curb their benefits, or which ones would be affected. But he did note that the top 1% benefit disproportionately from the major tax breaks on the books.
Such major breaks include the tax-free treatment of employer contributions to workers’ health insurance; tax preferred retirement savings; state and local tax deductions; and reduced rates on capital gains and dividends.
Tax investment trades: Van Hollen would impose a 0.1% transaction tax on financial trades, such as the buying and selling of stocks.
Van Hollen’s office estimates this provision alone could raise $500 billion to $800 billion over 10 years.