Personal Finance
What a Harris presidency could mean for her LIFT Act proposal
U.S. Vice President Kamala Harris delivers remarks during a campaign event at West Allis Central High School in West Allis, Wisconsin, on July 23, 2024.
Kevin Mohatt | Reuters
“Building up the middle class will be a defining goal of my presidency,” Vice President Kamala Harris said at a political event in West Allis, Wisconsin, on Tuesday — one of her first speeches since becoming the front-runner to replace President Joe Biden as the Democratic candidate for president.
As the Harris campaign takes shape, tackling the wealth gap is already front and center.
“When our middle class is strong, American is strong,” she said Tuesday.
That sentiment revisits an idea she has advocated for previously.
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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 LIFT can help renters
In today’s climate, the LIFT Act could financially benefit renters, 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 for renters 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.
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.”
What the LIFT Act would mean 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,” said Tomas Philipson, former chair of the White House Council of Economic Advisers. That makes many workers feel less confident about their financial standing — and less satisfied with 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.
Focus on the child tax credit
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.
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.
“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 last week before the president 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. However, the bill has been stuck in the Senate.
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 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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Some states have stopped disbursing funds to consumers via Biden-era rebate programs tied to home energy efficiency, due to a Trump administration freeze on federal funding enacted in January.
The Inflation Reduction Act, passed in 2022, had earmarked $8.8 billion of federal funds for consumers through two home energy rebate programs, to be administered by states, territories and the District of Columbia.
Arizona, Colorado, Georgia and Rhode Island — which are in various phases of rollout — have paused or delayed their fledgling programs, citing Trump administration policy.
The White House on Jan. 27 put a freeze on the disbursement of federal funds that conflict with President Trump’s agenda — including initiatives related to green energy and climate change — as a reason for halting the disbursement of rebate funds to consumers.
That fate of that freeze is still up in the air. A federal judge issued an order Tuesday that continued to block the policy, for example. However, it appears agencies had been withholding funding in some cases in defiance of earlier court rulings, according to ProPublica reporting.
In any event, the freeze — or the threat of it — appears to be impacting state rebate programs.
“Coloradans who would receive the Home Energy Rebate savings are still locked out by the Trump administration in the dead of winter,” Ari Rosenblum, a spokesperson for the Colorado Energy Office, said in an e-mailed statement.
The U.S. Department of Energy and the White House didn’t return a request for comment from CNBC on the funding freeze.
In some states, rebates are ‘currently unavailable’
Consumers are eligible for up to $8,000 of Home Efficiency Rebates and up to $14,000 of Home Electrification and Appliance Rebates, per federal law.
The rebates defray the cost of retrofitting homes and upgrading appliances to be more energy efficient. Such tweaks aim to cut consumers’ utility bills while also reducing planet-warming carbon emissions.
California, the District of Columbia, Maine, Michigan, New Mexico, New York, North Carolina and Wisconsin had also launched phases of their rebate programs in recent months, according to data on an archived federal website.
All states and territories (except for South Dakota) had applied for the federal rebate funding and the U.S. Department of Energy had approved funding for each of them.
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The Arizona Governor’s Office of Resiliency said its Home Energy Rebates programs would be paused until federal funds are freed up.
“Due to the current federal Executive Orders, memorandums from the White House Office of Management and Budget, and communications from the U.S. Department of Energy, funding for all Efficiency Arizona programs is currently unavailable,” it said in an announcement Friday.
Rhode Island paused new applications as of Jan. 27 due to “current uncertainty” with Inflation Reduction Act funding and executive orders, according to its Office of Energy Resources.
The Georgia Environmental Finance Authority launched a pilot program for the rebates in fall 2024. That program is ongoing, a spokesperson confirmed Monday.
However, the timeline for a full program launch initially planned for 2025 “is delayed until we receive more information from the U.S. Department of Energy,” the Georgia spokesperson explained in an e-mail.
However, not all states have pressed the pause button: It appears Maine is still moving forward, for example.
“The program remains open to those who are eligible,” Afton Vigue, a spokesperson for the Maine Governor’s Energy Office, said in an e-mail.
The status of rebates in the eight other states and districts to have launched their programs is unclear. Their respective energy departments or governor’s offices didn’t return requests for comment.
‘Signs of an interest’
While the Trump administration on Jan. 29 rescinded its memo ordering a freeze on federal grants and loans — two days after its initial release — the White House said the freeze nonetheless remained in full force.
Democratic attorneys general in 22 states and the District of Columbia filed a lawsuit against the Trump administration, claiming the freeze is unlawful. The White House has claimed it is necessary to ensure spending aligns with Trump’s presidential agenda.
David Terry, president of the National Association of State Energy Officials, said he is optimistic the rebate funding will be released to states soon.
“For these two particular programs, I do not think [the freeze] will stymie the programs,” Terry said. “I see signs of an interest in moving them forward and working with the states to implement them.”
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Lump sum payments to begin arriving in February
In a new update released on Tuesday, the SSA said it will begin issuing retroactive payments in February. Most people will receive the one-time payment by the end of March, according to the agency.
The SSA plans to process the increase to monthly benefits starting in April.
The new timeline “supports President Trump’s priority to implement the Social Security Fairness Act as quickly as possible,” Social Security acting commissioner Lee Dudek said in a statement.
“The agency’s original estimate of taking a year or more now will only apply to complex cases that cannot be processed by automation,” Dudek said. “The American people deserve to get their due benefits as quickly as possible.”
Among those affected include some teachers, firefighters and police officers in certain states; federal employees who are covered by the Civil Service Retirement System and people who worked under foreign social security systems, according to the Social Security Administration.
What affected beneficiaries should know
Retroactive payments, which most people should receive by the end of March, will be deposited directly into bank accounts on file with the Social Security Administration.
All affected beneficiaries should receive a notice by mail from the Social Security Administration with details about their retroactive payment and new benefit amount. Those notices should come two to three weeks after the retroactive payments, according to the agency.
If your direct deposit information or current mailing address are up to date with the agency, no action is needed, according to the agency. If you want to double check the information the agency has on file, you may sign into your personal online account or call the agency.
If you want to ask about the status of your retroactive payment, the Social Security Administration urges you to hold off until April.
Beneficiaries should also wait until after they have received their April monthly check before contacting the agency to ask about their new benefit amount.
The average tax refund is 10.4% lower than last year according to the latest Internal Revenue Service data, and inflation is taking more of those dollars.
Bill Oxford | E+ | Getty Images
The average tax refund this year is down 32.4% compared to last year, according to early filing data from the IRS.
Tax season opened on Jan. 27, and the average refund amount was $2,169 as of Feb. 14, down from $3,207 about one year prior, the IRS reported on Friday. That figure reflects current-year refunds only.
However, the Feb. 14 filing data doesn’t include refunds receiving the earned income tax credit or additional child tax credit, which aren’t issued before mid-February, the IRS noted. The previous year’s filing data included tax returns claiming these credits. The value of these tax breaks can be substantial, even resulting in five-figure refunds, in some cases.
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Typically, you can expect a refund when you overpay taxes throughout the year via paycheck withholdings or quarterly estimated payments. By comparison, there’s generally a tax bill when you haven’t paid enough.
Filing season numbers will ‘even out’
Although the average refund is currently smaller, “historically, filing season numbers even out as more tax returns come in,” according to the agency.
As of Feb. 14, the IRS received roughly 33 million individual tax returns of the more than 140 million it expects before the April 15 deadline.
As of Dec. 27, 2024, the average tax refund for the 2024 season was $3,138, compared to $3,167 in late December 2023.
‘Don’t call the IRS’ for refund updates
The latest filing statistics come amid mass layoffs for the agency as Elon Musk’s so-called Department of Government Efficiency, or DOGE, continues to cull the federal workforce.
It’s unclear exactly how the staffing reduction could impact future taxpayer service. But experts recommend double-checking returns for accuracy to avoid extra touch points with the agency.
“Don’t call the IRS looking for your refund,” said Tom O’Saben, an enrolled agent and director of tax content and government relations at the National Association of Tax Professionals.
You can check the status of your refund via the agency’s “Where’s My Refund?” tool or the IRS2Go app, which is “available 24 hours a day,” O’Saben said.
Typically, the agency issues refunds within 21 days of a return’s receipt. But some returns require “additional review,” which can extend the timeline, according to the IRS.
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