Personal Finance

Building up middle class will be a goal. How she may do it

Published

9 months ago

July 31, 2024

Vice President and 2024 Democratic presidential candidate Kamala Harris speaks at a campaign event in Atlanta, Georgia, on July 30, 2024.

Elijah Nouvelage | Afp | Getty Images

“Building up the middle class will be a defining goal of my presidency,” Vice President Kamala Harris said at a political event in Atlanta on Tuesday evening.

“When our middle class is strong, American is strong,” the de facto Democratic presidential nominee said to the crowd of more than 10,000 supporters.

“And to keep our middle class strong, families need relief from the high cost of living so that they have a chance, not to just to get by, but to get ahead,” Harris added.

Here’s a look at how Harris may make that happen, based on the policies she advocated for during her first presidential bid in 2020 and as a senator.

One of Harris’ signature proposals as senator — known as the LIFT the Middle Class Act, or Livable Incomes for Families Today — would have provided an annual tax credit of up to $3,000 per person (or $6,000 per couple) for lower- and middle-income workers, on top of the benefits they already receive.

The size of the credit would have amounted to “significant tax relief,” according to the Committee for a Responsible Federal Budget.

The Harris campaign did not immediately respond to CNBC’s request for comment.

How the LIFT Act could look today

Since the LIFT Act was first proposed in 2018, the cost of living has only skyrocketed, hitting working-class Americans especially hard.

For these households, “real incomes have declined or remained flat due to inflation,” Tomas Philipson, former chair of the White House Council of Economic Advisers, told CNBC. That makes many workers feel less confident about their financial standing — and less satisfied with President Joe Biden’s handling of the economy.

At the same time, the rise of artificial intelligence has stoked fears about long-term job security.

In that context, “there’s a good rationale” for refloating a tax credit for those making under a certain income threshold, according to Laura Veldkamp, a professor of finance and economics at Columbia University Business School.

“A lot of people are asking the question, ‘Will AI take my job?’ There are people whose hard-earned skills could be obsolete,” she said. “One way to deal with that is to have more social insurance.”

But a tax credit like LIFT would also be extremely costly, according to Tax Policy Center estimates from 2018 and 2019.

To help cover the tab for the additional financial support, Harris at the time proposed repealing provisions of the Tax Cuts and Jobs Act for taxpayers earning more than $100,000.

However, funding such a tax credit now could be tough amid growing concerns over the federal budget deficit. Harris will also need to address trillions of expiring tax cuts enacted by former President Donald Trump before 2025.

How the LIFT Act could support renters

A present-day version of the LIFT Act may benefit renters the most, as many are part of the income category the tax credit is targeting, according to Francesco D’Acunto, an associate professor of finance at Georgetown University.

D’Acunto and other experts suggest the LIFT Act might even be a better aid than the 5% rent cap proposal Biden unveiled on July 16. That proposal calls on Congress to cap rent increases from landlords with 50 existing units or more at 5% or risk losing federal tax breaks.

Harris also supported the idea of rent caps at the campaign rally in Atlanta: “We will take on corporate landlords and cap unfair rent increases.”

However economists have found that such policies inadvertently bring down the available supply of rental units. And rent-control policies could further affect an already, relatively short supply, according to a report by the Federal Reserve published in February.

Rental vacancy rates, or the percentage of all units available for rent, measure the tightness of rental markets; the higher the vacancy rate, the easier it is to find housing, per the Fed.

In 2021, the overall vacancy rate slid to 5.6%, the lowest level since 1984, the central bank found. Supply has since rebounded and plateaued at 6.6% in April, per Census data via the Fed.

While the rent cap may lead consumers to believe prices will not increase significantly, it could have negative side effects, such as landlords taking their properties off the rental market, said Karl Widerquist, an economist and professor of philosophy at Georgetown University.

Plus, landlords who lose those federal tax breaks will still be able to raise rents, said Jacob Channel, a senior economist at LendingTree.

The advantage of the LIFT tax credit, said D’Acunto, is that it doesn’t create the same market distortions the rent cap would ignite. “But instead now on the side of the renter, we are actually very directly helping them to defray the effects of rent inflation,” he said.

Adds Widerquist: “We very often give tax benefits to all homeowners in the name of making it more affordable for people to become homeowners, and we don’t give a similar tax break to people who are paying rent. Those are the people who are struggling to become owners.”

Child tax credit is a ‘huge priority’ for Democrats

LIFT was first proposed years before Congress temporarily expanded the child tax credit during the Covid-19 pandemic, which could now be a bigger priority, experts say.

The American Rescue Plan boosted the child tax credit to $3,000 from $2,000, with an extra $600 for children under age 6 for 2021, and families received up to half upfront via monthly payments. Harris described the child tax credit changes as one of the “most important” and “most impactful” parts of the legislation in a 2021 speech.

The child poverty rate plunged to a historic low of 5.2% in 2021, largely due to the expansion, a Columbia University analysis found. Then in 2022, the rate more than doubled to 12.4% after pandemic relief expired, according to the U.S. Census Bureau.

Harris considers VP picks and fundraising potential

“Whereas the last administration gave tax cuts to billionaires, we gave tax cuts to families through the child tax credit, which cut child poverty in America by half,” Harris said at a political event in North Carolina in late July, before Biden left the race.

Biden’s fiscal year 2025 budget aimed to restore the 2021 child tax credit increase and House lawmakers in January passed a bipartisan tax package, which included a child tax credit expansion. The Senate has scheduled a procedural vote for the bill on Thursday, which will force lawmakers to take a stand on the issue ahead of November.

The enhanced tax break is “a huge priority for Democrats,” said Garrett Watson, senior policy analyst and modeling manager at the Tax Foundation.

Still, it’s unclear whether Harris, now the clear front-runner for the nomination, will renew calls for LIFT or focus on the child tax credit, which has a different design but a similar goal, he said.

“It’s very hard to say whether they would revisit specific policy options from so long ago,” said Columbia Business School economics professor Brett House.

For now, “there are other cultural and political issues that are going to dominate.”

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Personal Finance

Social Security changes to monitor under new agency leadership

Published

20 hours ago

May 11, 2025

Business Finance News

A Social Security Administration office in Washington, D.C., on March 26. The Department of Government Efficiency (DOGE) is reportedly aiming to reform and downsize the agency.

Saul Loeb | Afp | Getty Images

The Social Security Administration is under new leadership, after financial services executive Frank Bisignano was sworn in as commissioner this week.

Bisignano’s confirmation follows a host of changes at the federal agency during the first 100 days of the Trump administration, many of them through the Department of Government Efficiency.

For the approximate 73 million beneficiaries who rely on monthly Social Security checks, those changes may affect how they receive services from the agency.

From benefit increases for certain pensioners to changing policies on benefit withholdings and customer service, here are some of the biggest shifts of which beneficiaries should take note.

Certain pensioners see benefit increases

President Joe Biden after he signed the Social Security Fairness Act at the White House on Jan. 5 in Washington, D.C.

Kent Nishimura | Getty Images News | Getty Images

A new law that went into effect in January will provide almost 3 million individuals with increased Social Security benefits.

The Social Security Fairness Act provides higher monthly Social Security checks for individuals who also receive pensions from work that did not include payment of Social Security payroll taxes. It will also provide lump sum retroactive payments starting from January 2024.

Monthly benefit increases may range from “very little” to “over $1,000 more each month,” according to the Social Security Administration, which began those adjustments in February.

The change affects certain workers such as teachers, firefighters and police officers; federal employees under the Civil Service Retirement System; and people who work under foreign social security programs, according to the agency. Those workers had previously seen their benefits reduced or eliminated due to the Windfall Elimination Provision and Government Pension Offset, which have been nixed with the new law.

In the first 100 days of the Trump administration, SSA has paid more than $14.8 billion in retroactive payments to more than 2.2 million individuals, according to the agency.

The agency has expedited the processing of the benefit changes under President Donald Trump. However, it may take a year or more to issue payments for some cases that cannot be processed through automation, according to the agency.

New default withholding rate for repaying benefits

Fertnig | E+ | Getty Images

Social Security beneficiaries are sometimes overpaid benefits due to errors.

When that happens, the Social Security Administration requires the extra money to be repaid to the agency.

Because it can take months or years to catch on to those mistakes, beneficiaries can be on the hook to repay big sums. That money may be withheld from benefit checks until the overpayment has been repaid.

The Social Security Administration has made various adjustments to the default withholding rate from benefits.

In response to complaints that a 100% default withholding rate caused financial hardship for affected beneficiaries, the agency under President Joe Biden changed that default withholding rate to 10% of a beneficiary’s monthly benefit or $10, whichever was greater.

Under Trump, SSA has had a tougher stance on overpayments. In March, the agency announced it planned to reinstate the default withholding rate to 100% of an individual’s monthly benefit. The change was estimated to generate about $7 billion in overpayment recoveries in the next decade.

However, the agency recently issued an emergency message notifying its employees that new overpayment notices sent on or after April 25 will have a 50% default withholding rate. That applies to retirement, survivors and disability insurance benefits. The withholding rate for Supplemental Security Income, or SSI, benefits is still 10%.

Some experts worry a 50% default withholding rate is still too high.

“Losing 50% [of benefits] for a lot of people could put them into immediate economic hardship,” Richard Fiesta, executive director of the Alliance for Retired Americans, recently told CNBC.com.

Student loan debtors may have benefits garnished

Student loan default collection restarting

Overpayment of Social Security is not the only reason benefits may be withheld.

On May 5, the government resumed collections efforts on federal student loans in default. Now, the Education Department may use the Treasury Department Offset Program to withhold benefits for defaulted loans, as well as other payments like tax refunds and salaries. Some of those garnishments could start as soon as June, according to the Education Department.

The Social Security Administration may also withhold current and future Social Security checks for child support, alimony or restitution payments, according to the agency.

The IRS may take a portion of Social Security payments until it recoups the full balance of overdue federal tax debts.

Beneficiaries face long wait times for service

The Social Security Office in Alhambra, California.

Mario Anzuoni | Reuters

Individuals who call SSA’s 800 phone number face long hold times before they speak to someone at the agency.

To make an in-person appointment, they must either call that number or visit the website, which has experienced glitches.

Those difficulties are “neither new nor unique to the current administration,” Republican House Ways and Means Committee members recently wrote to Bisignano. Meanwhile, Democrats worry those difficulties could signal bigger problems ahead.

In a bid to reduce wait times, the agency has encouraged individuals to use its web site when possible.

The agency is in the process of modernizing its telecommunications platform, which is expected to allow it to better manage calls and provide more self-service options. The rollout, which is expected to be completed by the end of this summer, has helped improve answer rates and average speed of answer, based on early results, according to the Social Security Administration.

What you need to know about Social Security

As Bisignano takes the helm, advocacy groups are urging for the agency to make the needs of its beneficiaries a priority.

“The vast majority of his current customer base cannot transact financial business through anything other than face to face contact in an office or on the telephone, and they have to be prepared to accommodate that,” said Maria Freese, senior legislative representative at the National Committee to Preserve Social Security and Medicare.

Some may be required to make in-person office visits

A Social Security Administration (SSA) office in Washington, DC, March 26, 2025.

Saul Loeb | Afp | Getty Images

The Trump administration tasked the Department of Government Efficiency with curbing “waste, fraud and abuse” at federal agencies.

Under DOGE, the Social Security Administration sought to make it so services that could previously be handled over the phone would need to be done in person at an agency office to prevent fraud.

However, the agency has since scaled back that policy to allow for claims for retirement, survivor and spousal and children’s benefits to still be permitted over the phone. Individuals making other claims, including Social Security disability insurance, Medicare and Supplemental Security Income, can also still use the agency’s 800 number.

Notably, changes to direct deposit information will mostly still need to be handled either online or in person.

Consequently, almost 2 million more elderly and disabled individuals may need to visit Social Security offices in person annually, the Social Security Administration has revealed.

The online process may be difficult for some individuals because it requires multi-factor, multi-step online verification and a one-time PIN code, CBPP notes. Previous estimates have found that about 42% of older adults may lack access to reliable broadband service, according to the AARP.

In some cases, people may be able to change their direct deposit information over the phone if they are also able to verify their identity online, according to Freese.

The agency has “left this very convoluted system in place to use the telephone in order to change your banking information, but for the vast majority of seniors and members of the disability community, they’re never going to be able to use it,” Freese said.

Direct deposit fraud represents less than one-hundredth of one percent of benefits that are misdirected, according to the Center on Budget and Policy Priorities.

Digital Social Security cards available this summer

Douglas Sacha | Getty Images

The Social Security Administration plans to roll out a new secure digital form of identification as an alternative to traditional paper cards beginning early this summer.

The new digital feature will allow individuals who have either forgotten their Social Security number or who have lost their Social Security cards to access their personal number online through the agency’s My Social Security website.

They will also be able to access their Social Security numbers through digital devices and display them as identification for “reasons other than handling Social Security matters,” according to the agency.

With the new effort, the agency aims to reduce the inconveniences caused by lost or stolen cards, which currently requires individuals to apply for replacements either online or in person.

Personal Finance

The key issues and who stands to benefit

Published

2 days ago

May 10, 2025

Business Finance News

U.S. President Donald Trump announces the NFL draft will be held in Washington, at the White House in Washington, D.C., U.S., May 5, 2025.

Leah Millis | Reuters

As negotiations ramp up for President Donald Trump‘s tax agenda, there are key issues to watch, according to policy experts.

The House Ways and Means Committee, which oversees taxes, released a preliminary partial text of its portion of the bill on Friday evening. However, the bill could change significantly before the final vote. The full committee will debate and advance this legislation on Tuesday.

With control of the White House and both chambers of Congress, Republican lawmakers can pass Trump’s package without Democratic support via a process known as “reconciliation,” which bypasses the Senate filibuster with a simple majority vote.

But reconciliation involves multiple steps, and the proposals must fit within a limited budget framework. That could be tricky given competing priorities, experts say.

“The narrow [Republican] majority in the House is going to make that process very difficult” because a handful of votes can block the bill, said Alex Muresianu, senior policy analyst at the Tax Foundation.

Plus, some lawmakers want a “more fiscally responsible package,” which could impact individual provisions, according to Shai Akabas, vice president of economic policy for the Bipartisan Policy Center.

As negotiations continue, here are some key tax proposals that could impact millions of Americans.

Extend Trump’s 2017 tax cuts

The preliminary House Ways and Means text includes some temporary and permanent enhancements beyond the TCJA. These include boosts to the standard deduction, child tax credit, tax bracket inflation adjustments, the estate tax exemption and pass-through business deduction, among others.

Child tax credit expansion

Some lawmakers are also pushing for bigger tax breaks than what’s currently offered via the TCJA provisions.

“The child tax credit is one that we’re watching very closely,” Akabas said. “There’s a lot of bipartisan agreement on preserving and hopefully expanding that.”

TCJA temporarily increased the maximum child tax credit to $2,000 from $1,000 per child under age 17, and boosted eligibility. These changes are scheduled to sunset after 2025.

The House in February 2024 passed a bipartisan bill to expand the child tax credit, which would have boosted access and refundability. The bill didn’t clear the Senate, but Republicans expressed interest in revisiting the issue.

The early House Ways and Means text proposes expanding the maximum child tax credit to $2,500 per child for four years starting in 2025.

‘SALT’ deduction relief

Another TCJA provision — the $10,000 limit on the deduction for state and local taxes, known as “SALT” — was added to the 2017 legislation to help fund other tax breaks. That provision will also expire after 2025.

Before the change, filers who itemized tax breaks could claim an unlimited deduction for SALT. But the so-called alternative minimum tax reduced the benefit for some higher earners.

Repealing the SALT cap has been a priority for certain lawmakers from high-tax states like California, New Jersey and New York. In a policy reversal, Trump has also voiced support for a more generous SALT deduction.

“If you raise the cap, the people who benefit the most are going to be upper-middle-income,” since lower earners typically don’t itemize tax deductions, Howard Gleckman, senior fellow at the Urban-Brookings Tax Policy Center, previously told CNBC.

The SALT deduction was absent from the preliminary House Ways and Means text. But Congressional negotiations are ongoing.

What the IRS layoffs mean for your taxes this tax season

Trump’s campaign ideas

On top of TCJA extensions, Trump has also recently renewed calls for additional tax breaks he pitched on the campaign trail, including no tax on tips, tax-free overtime pay and tax-exempt Social Security benefits. These ideas were not yet included in the early House Ways and Means text.

However, there are lingering questions about the specifics of these provisions, including possible guardrails to prevent abuse, experts say.

For example, you could see a questionable “reclassification of income” to qualify for no tax on tips or overtime pay, said Muresianu. “But there are ways you could mitigate the damage.”

Personal Finance

How top tax rates compare, as Trump eyes hike for wealthy

Published

2 days ago

May 9, 2025

Business Finance News

U.S. President Donald Trump points as he attends the annual Friends of Ireland luncheon hosted by U.S. House of Representatives Speaker Mike Johnson (R-LA) at the U.S. Capitol in Washington, D.C., U.S., March 12, 2025.

Evelyn Hockstein | Reuters

As Republicans wrestle with funding their massive spending and tax package, President Donald Trump is eyeing a possible tax hike for the highest earners.

The idea, which lacks Republican support, could return the top federal income tax rate to 2017 levels for some of the wealthiest Americans.

In a phone call Thursday, NBC reported, Trump pressed House Speaker Mike Johnson, R-La., to raise the top income tax rate on the wealthiest Americans and close the so-called carried interest loophole. The proposal would revert the 37% rate to 39.6% for individuals making $2.5 million or more per year, to help preserve Medicaid and tax cuts for everyday Americans.

Trump on Friday expressed openness to the tax hike on the wealthiest Americans in a Truth Social post, noting he would “graciously accept” the tax increase to “help the lower and middle income workers.”

“Republicans should probably not do it, but I’m OK if they do!!!” he wrote.

Enacted by Trump, the Tax Cuts and Jobs Act, or TCJA, of 2017 created sweeping tax breaks for individuals and businesses. Most will sunset after 2025 without an extension from Congress.

The TCJA temporarily dropped the highest income tax rate from 39.6% to 37%. For 2025, the 37% rate kicks in for single filers once taxable income exceeds $626,350.

How Trump’s idea compares to historic rates

If signed into law, a top 39.6% income tax rate would return wealthy taxpayers to pre-TCJA levels from 2013 to 2017. Before that, the top rate was 35% during most of the early 2000s, according to data collected by the Tax Policy Center. The highest top rate was 94% from 1944-1945.

However, this data doesn’t reflect how much income was subject to top rates or the value of standard and itemized deductions during these periods, the organization noted.

Trump’s tax package faces a ‘math issue’

With control of Congress, Republicans can pass legislation through a process known as “reconciliation,” which can sidestep the Senate filibuster with a simple majority.

However, there’s still disagreement about what should be included in the multi-trillion-dollar bill and how to finance it.