Hypocrisy of Democrats’ ‘Build Better’ Bill Giving Rich Huge Tax Cut
For the first five years, the most expensive part of the House Democrats’ version of “Build Better” or “human” infrastructure, the bill is a massive tax cut for millionaires and billionaires. . This provision would raise the cap from $ 10,000 to $ 80,000 on income tax deductions for state and local taxes (commonly referred to as “SALT” among budget nerds).
Given how embarrassing this is for a party that has campaigned against millionaires and billionaires for years, some Democrats prefer to say that this is only the second costliest provision. They do this by merging the childcare and pre-K programs into one piece.
But no matter how you cut it, giving a huge tax cut to the super-rich is a strange thing to do when you claim that the solution to our problems is just to make the rich “pay their fair share.” It’s even stranger when you consider that this tax break would be even more bigger and more regressive than the fiscal “giveaway” from former President Trump that has been so vilified by progressives – which the House version would have keep. The benefits of the Democrats’ regressive giveaway would largely go to taxpayers in the top 20% of the income scale and massively benefit the wealthiest 0.1% of earners, especially in high-tax states like New York. , New Jersey, Illinois and California.
Obviously, this is all ripe for accusations of hypocrisy. But what explains the hypocrisy? I see three mutually reinforcing reasons.
First, and most obvious, House Speaker Nancy Pelosi needed every vote she could get to pass this thing in the House, because no Republican would vote for it, and State Democrats would vote for it. high taxers insisted on reinstating the greatly reduced SALT deduction by Republicans under Trump.
Second, for all their rhetoric of impregnating the rich, Democrats also rely on wealthy donors. In 2020, 24 of the top 50 individual donors gave to Democrats. Liberal billionaires are also a thing. As in 2008, Wall Street money went disproportionately to Biden and other Democrats in 2020.
Typically, culture war issues help Republicans with voters and Democrats with donors. But sometimes wealthy liberals also want their financial interests protected.
But I think the main reason for the SALT giveaway has less to do with Democrats hauling water for the 1% and more to do with protecting what Walter Russell Mead has dubbed the “blue social model”. politics. The Democratic Party is heavily – and increasingly – dependent on urban voters (often white) with a university education, clustered in large cities and very wealthy suburbs.
These heavily taxed states and towns need the rich to pay for everything from generous benefits to public sector unions, unfunded pensions and bloated bureaucracies. The SALT deduction reduces the incentives for the rich to vote with their feet. But that doesn’t eliminate them, which is why so many people shy away from high tax states like California and New York for low tax states like Florida and Texas. Of course, not all of them are tax fugitives; some are leaving because of issues such as affordability and business regulation, which are also issues for blue model jurisdictions.
On another level, the SALT deduction also helps hide and subsidize poor state and local tax and spending decisions.
Indeed, much of Build Back Better is designed to appeal to the Blue Model coalition. A massive tax credit for electric cars can be streamlined in the context of climate change, but it also serves voters in the Blue State, who own the lion’s share of electric vehicles. Likewise, the Bill’s provisions on child care could prevent many religious institutions from receiving federal grants due to federal non-discrimination laws – despite the fact that more than half (53%) of families who depend on these services do so through institutions affiliated with a religion. This reflects another example of favoring Democratic interest groups.
At this point, it is not clear whether the SALT provision in the House version will survive in the Senate. Senator Bernie Sanders of Vermont – unlike his progressive counterparts in the House – remains opposed, as he rightly sees it as a gift to the millionaires and billionaires he denounces. He’s working with Senator Robert Menendez of New Jersey on a less regressive version of the SALT provision.
But tinkering cannot hide the fact that the Democrats’ agenda is as much to invest in their own party’s infrastructure as it is to invest in that of the country.
This story originally appeared in the Los Angeles Times.