At an event at the Center for American Progress, House Budget Committee Ranking Member Chris Van Hollen (D-MD) unveiled an "Action Plan" to broadly cut taxes for the middle class. The reported $1.2 trillion cost of the plan would be offset with revenue from high earners and the financial sector. The details of the plan have not been completely spelled out yet, but it is encouraging that Van Hollen is committed to paying for the full costs. However, using increased revenues to pay for a middle class tax cut will make future deficit reduction more difficult.
Here are the major elements of Van Hollen's plan, including four parts that would cost money and three proposals to raise money.
Paycheck Bonus Tax Credit
The plan's centerpiece is a Paycheck Bonus Tax Credit, which would provide a $1,000 credit for single earners and $2,000 for couples. The credit would phase out at incomes of $100,000 and $200,000 indexed for inflation. Van Hollen indicated that the credit was not refundable, meaning that people with no income tax liability would not benefit, but that he intends to consider changes to make it at least partially refundable, which would be more expensive and provide more benefit to lower-income households. This credit is the plan's most expensive, potentially making up four-fifths of the plan's cost, depending on the exact details.
If taxpayers put at least half of their tax credit into a tax-preferred savings plan, they would qualify for an additional $250 Savers' Bonus credit.