Three Democratic Senators have recently proposed big new tax plans.

—Sen. Bernie Sanders (I-VT) (along with California Rep. Ro Khanna) proposed the Make Billionaires Pay Their Fair Share Act, which would set a five percent tax on the wealth of the “938 billionaires in America — who are now collectively worth $8.2 trillion.” They score the tax to raise $4.4 trillion over 10 years (this score has been critiqued as optimistic), some of which would be redistributed to people in households with incomes below $150,000.

—Sen. Chris Van Hollen (D-MD) and Sen. Cory Booker (D-NJ) have each proposed different tax cuts. The core of both proposals is a significant increase in the standard deduction, though important differences exist between the two.

It is these two on which I’d like to focus today (I’ll get back to Sanders/Khanna; I’m sympathetic to the need to tax wealth, which largely goes untaxed; the Constitution, however, is a bit of a hurdle in this regard).

Bottom Line Up Front: I get their motivation, but, with one big exception (tariffs), I don’t think Democrats should engage in big federal tax cuts. For one, because of the way they’re structured, these cuts tend to go pretty far up the income scale, spending scarce resources on folks who arguably don’t need yet another tax cut. For another, we need more, not less revenues if we’re going to implement affordability, anti-poverty, and upward mobility agendas that are more likely to lastingly help struggling families.

The great Chuck Marr posted helpful Twitter threads on each of the two tax cut proposals (Van Hollen, Booker) and the Yale Budget Lab has their typically infomative scores of each (Van Hollen, Booker). The broad strategy in both proposals is to increase the standard deduction enough so that more families would face zero or lower federal tax liabilities (the current standard deduction is ~$16K and ~$32K for individuals and married couples, respectively). Van Hollen sets the no-tax line at $46,000 for individuals and $92,000 for couples, leading to something like half of households paying no federal income tax, vs. around 40 percent now (of course, earners would still pay federal payroll taxes).

Booker more than doubles the current standard deduction and boosts refundable credits for lower-income families, including the child tax credit and the earned-income tax credit. Importantly, Van Hollen phases out his tax break; Booker does not, making his a lot more expensive. The Budget Lab scores Booker’s plan at $5.3 trillion, including his high-end tax increases. They score Van Hollen's cuts as costing $1.6 trillion, but that amount is fully offset by a surcharge on millionaires, ranging from 5 to 12 percent.

Chuck makes a few other points:

Van Hollen:

—Ppl w/ larger affordability challenges will likely get less (or nothing): For example, a low paid worker making well below the $46,000 affordability threshold will get far less than the person w/ income at the threshold (who faces less challenging affordability issues). [JB: Budget Lab has change in after-tax inc flat for bottom fifth (up 0.2%).]
—The tax cut is paid for w/ an excellent revenue-raiser: a surtax on millionaires, who got huge Bush/Trump tax cuts, that raises $1.5T over 10 yrs. A key issue here is opportunity cost - is this the best use of revenue from this offset? [I'll come back to that.]

Booker:

—Despite its high cost, the standard deduction expansion would provide little or nothing to many low-income people and much more to higher-income people who face far fewer challenges affording basic needs and don’t need another tax cut.
—A few examples – assume all married couples with no kids:
- Household w/30k in earnings does not benefit.
- Household w/$50k in earnings gains $1,780.
- Household w/$300k in income gains $10,272.

That last number is really something. The Budget Lab has after-tax income for the fourth income quintile going up a robust five percent and the top fifth gets (yet another) cut of one percent, though that’s all for the 80-90th percentile (the Lab’s 90th percentile is ~$217,000); the top 10 percent gets hit by Booker’s progressive pay-fors. Still, at that point in the income scale, you’re really just adding more after-tax income to those who just got a boost from the Trump tax cuts.

Booker’s plan significantly lifts the after-tax incomes of the bottom fifth through the refundable credit expansions noted above. The Lab has their income up percent, the most of any quintile, on the back of child tax credit/earned income tax credit expansions.

It’s early in the electoral season, and good for them and their staffs for putting out new ideas. I know beyond a doubt that both of these senators are acting in good faith to try to help reconnect economic growth and the living standards of a lot of folks who’ve been left behind.

In fact, whenever I talk about affordability, which is often, I try to remind listeners that yes, affordability is a price issue, but it’s also very much an income issue, and these senators are of course correct that more after-tax income means a greater ability to make ends meet.

And sure, if the only way to help people was to cut their taxes, I’d think differently about this. I’d still worry about deficit financing a tax cut—I like both Senators’ pay-fors—but history is clear that Congress is way more comfortable cutting than raising taxes, so there’s a non-zero chance we get the cuts and not the offsets. As long-term readers know, I used to be a lot more fiscally dovish about such spending but with both sides giving up on anything resembling fiscal rectitude, debt at 100 percent of GDP and climbing quickly, and most concerning of all, interest rates tracking higher, I’m considerably less chill.

But—and this is my key concern about these proposals—I don’t believe that tax cuts are the only way to help people. This is Chuck’s “opportunity cost” point. A dollar spent on a tax cut is not available for what I view as one of the Ds most important contributions to economic policy: identifying and taking action against market flaws and failures.

The affordability agenda is the latest e.g., and it is a good one. It’s also costly, but it’s worth it. A national program that makes childcare affordable, that helps to build affordable housing, that subsidizes health coverage and restores the Rs recent Medicaid cuts, that reduces poverty through refundable tax credits that go to people whose income is too low to incur a federal liability (folks who aren’t helped by raising the standard deduction, though, as noted, Booker's plan extends such credits), that boosts upward mobility through educational support—all of those are policies that good, hardworking Democrats (including Van Hollen and Booker) have long fought for, even if such progress has been stymied in the age of Trump.

To spend trillions on tax cuts, even if they’re better targeted than the Republicans' version, risks hugely underfunding this agenda. I worry that to lead with tax cuts of this magnitude is to implicitly give up on trying to lastingly improve the structure of our economy from the perspective of working families for whom macroeconomic growth has too often been a spectator sport. And if you fail to alter the foundational unfairness in the structure of the economy, you’ll have no other option than to come back to the tax-cut well every few years.

And after reading all that, if you still want to cut a tax, absolutely be my guest: cut the damn tariffs and call it a day, and a very good day at that.

Jared Bernstein is a former chair of the White House Council of Economic Advisers under President Joe Biden. He is a senior fellow at the Council on Budget and Policy Priorities. Please consider subscribing to his Substack.

Reprinted with permission from Econjared.