On Sunday, Senator Kamala Harris (D-CA), who is undoubtedly running against Senators Elizabeth Warren (D-MA), Kirsten Gillibrand (D-NY) and Cory Booker (D-NJ) for the Democratic 2020 nomination, tacked Left again by tweeting out a new proposal for a cash giveaway. What’s the giveaway this time?
Let Harris explain:
Under the Rent Relief Act, anyone who spends more than 30% of their income on rent would be eligible for a federal tax credit. What would you do with that extra money in your pocket?
— Kamala Harris (@KamalaHarris) July 28, 2018
So, this is stupid.
Here’s why. Imagine that you spend $3,000 on rent and make $10,000 in gross income per month. Now the government gives you and everybody like you a percentage back on your taxes. This creates additional demand in the housing market, as everyone who is competing to take your apartment offers the landlord that extra cash. So the cost escalates for your apartment. Here’s what you’ll be using that extra money for: rent.
This is precisely what happens with every subsidy: you generate more of that which you are subsidizing. If you subsidize rent, you create higher rental prices. Undoubtedly, Harris would then answer that we need rent control – which would lead to less development of real estate, leading to housing shortages. And those housing shortages are supposedly what Harris is attempting to prevent in the first place.
Unintended consequences of bad policy generally outweigh their benefits. The fact that Harris doesn’t get this – or that she does, but doesn’t care so long as she looks generous – should tell people why voting Democrats into Congress is a rather large mistake.