On Wednesday, Rep. Ro Khanna (D-CA) and progressive Sen. Sherrod Brown (D-OH) introduced a tax plan that aims to be the Democratic Party’s alternative to President Donald Trump’s tax reform plan.
“I think it’s going to be our party’s answer to Donald Trump on taxes,” Khanna told the San Jose Mercury News. “While he’s proposing tax cuts for the investor class, we’re proposing support for the working and middle class.”
The Brown-Khanna plan will reportedly cost approximately $1.4 trillion over 10 years.
According to the San Jose Mercury News, “Khanna said a separate financial transaction tax and taxes on the highest-earning incomes could pay for” his plan.
The Mercury News notes that Khanna’s and Brown’s plancwould provide significant tax credits to America’s working class and drastically expand the Earned Income Tax Credit (EITC), a provision enacted during the Ford administration through the Tax Reduction Act of 1975. “Low-income taxpayers without dependent children would see their credit rise from a maximum of $510 to $3,000, and families would see their maximum credit rise from $6,318 to $12,131, depending on their income and number of children,” wrote the San Jose Mercury News.
However, the EITC is not without its problems, or critics. Last year, Breitbart News reported:
The Internal Revenue Service hands out billions of dollars in improper tax credits each year and, according to the Treasury Inspector General for Tax Administration, last fiscal year was no different.
In an audit report publicly released this week, TIGTA reveals that 23.8 percent — or $15.6 billion — of the Earned Income Tax Credits (EITC) the IRS paid out were improper. The EITC is a tax benefit intended for low to moderate income people.
The Office of Management and Budget defines an improper payment as “any payment that should not have been made, was made in an incorrect amount, or was made to an ineligible recipient” and considers the EITC to be a “high risk” for improper payments.
President Donald Trump’s tax plan seeks to include what the president described as a “major” tax cut for middle-class families; the biggest since President Ronald Reagan.
Breitbart News reported Wednesday that Trump “argued that the rich ‘will not be gaining at all’ with his proposed tax plan.”
On Tuesday, Treasury Secretary Steve Mnuchin reportedly said top earners would not see their tax bill lowered under the Trump plan. Speaking at CNBC and Institutional Investor’s Delivering Alpha Conference, Mnuchin reportedly said, “In the high tax states, there will not be a tax decrease.”
The Mercury News noted that Khanna said his proposal is already winning support from prominent Democrats, including Sens. Kirsten Gillibrand (D-NY), Cory Booker (D-NJ), Rep. John Delaney (D-MD).
However, there seems to be no clear sense of the fiscal consequences of Khanna’s proposal.