Based on rhetoric, the Democratic Party is committed to a class-warfare agenda.
They want higher income tax rates, higher capital gains taxes, higher Social Security taxes, higher death taxes, a new wealth tax, and many other tax hikes that target upper-income taxpayers.
There are various reasons why they push for these class-warfare tax hikes.
- They want more revenue to finance bigger government.
- They think it’s politically advantageous to create social discord.
- They are envious and resentful of successful people.
I don’t pretend to know which factor dominates.
But that’s not important because I want to make a different point. Notwithstanding all their rhetoric, Democrats are sometimes willing to shower rich people with tax breaks.
The Wall Street Journal exposes the left’s hypocrisy in the fight over the deduction for state and local taxes.
Democrats have…grown more concentrated in the richest parts of the country. That explains the strange spectacle of a Democratic presidential field running on the most redistributionist agenda in memory even as Democrats in Congress try to expand a tax break for high-earners
in the New York City, San Francisco and Los Angeles metropolitan areas. …Coastal Democrats have failed with gimmicks at the state and federal level to eliminate the SALT cap. The latest effort is the Restoring Tax Fairness for States and Localities Act, which passed the House Ways and Means Committee last week. …The bill would raise the SALT deduction cap in 2019 and eliminate it in 2020 and 2021. …The Tax Foundation found the biggest benefit from the unlimited deduction went to households with incomes above $1 million.
A related issue is the federal government’s special tax exemption for interest paid to holders of state and local government bonds.
I explained in 2013 why it’s bad tax policy.
Josh Barro explained the previous year why this tax break is a boon for the rich.
In 2011, 35,000 taxpayers making more than $200,000 a year paid no federal income tax. …61 percent of those avoided tax for the same reason: their income consisted largely of interest on tax-exempt municipal bonds. As Washington looks…to eliminate
tax preferences for the wealthy, why not eliminate this exemption? …Nearly all of those bondholders are either for-profit corporations or individuals with high incomes. The higher your tax bracket, the greater the value of the tax preference… muni bonds have an unfortunate feature…subsidies are linked to the interest rate. That means issuers who must pay higher interest rates get more valuable subsidies. Perversely, the worse a municipality’s credit, the greater incentive it is given to borrow more money.
Needless to say, it’s not a good idea to have a tax break that benefits the rich while subsidizing profligate states like New Jersey and Illinois.
In a column for Real Clear Policy, James Capretta analyzes how Democrats are working hard to preserve a big loophole.
The push to get rid of the Cadillac tax is short-sighted for both parties, but particularly for the Democrats. …In its estimate of H.R. 748, CBO projects that Cadillac tax repeal would reduce federal revenue by $200 billion over the period 2019 to 2029,
with more than half of the lost revenue occurring in 2027 to 2029. …When examined over the long-term, repeal of the Cadillac tax is likely to be one of the largest tax cuts on record. …If the Cadillac tax is repealed, the government will have less revenue to pay for the spending programs many in the party want to expand. And Republicans will be able to say that it was the Democrats, not them, who paved the way for this particular trillion dollar tax cut.
Not only is it a big tax cut to repeal the Cadillac tax, it’s also a tax cut that benefits the rich far more than the poor.
Here are some distributional numbers from the left-leaning Tax Policy Center. I’ve highlighted in red the most-important column, which shows that the top-20 percent get more than 42 percent of the tax cut while the bottom-20 percent get just 1.2 percent of the benefit.
For what it’s worth, I don’t care whether tax provisions tilt the playing field to the rich or the poor.
I care about good policy.
That’s why I like the Cadillac tax, even though it was part of the terrible Obamacare legislation.
In other words, I think principles should guide policy.
My Democratic friends obviously disagree. They beat their chests about the supposed moral imperative to “soak the rich,” but they’re willing to shower the wealthy with big tax breaks so long as key interest groups applaud.
[…] will close by observing that there has also been a vigorous effort from our friends on the left to restore an unlimited deduction for state and local […]
[…] will close by observing that there has also been a vigorous effort from our friends on the left to restore an unlimited deduction for state and local […]
[…] will close by observing that there has also been a vigorous effort from our friends on the left to restore an unlimited deduction for state and local […]
[…] Yes, resentment against success motivates many people on the left, but elected Democrats are not the same as left-wing […]
[…] Yes, resentment against success motivates many people on the left, but elected Democrats are not the same as left-wing […]
[…] well-to-do taxpayers can simply shift all their investments into tax-free municipal bonds (that’s bad for the rest of us, by the way, since it’s better for growth if they invest in […]
[…] well-to-do taxpayers can simply shift all their investments into tax-free municipal bonds (that’s bad for the rest of us, by the way, since it’s better for growth if they invest […]
[…] Even though it would be a massive tax cut for the rich, Democrats want to restore the state and local tax deduction. Even if they are successful, though, […]
[…] written about how our friends on the left represent the rich, and pointed out how big parts of their agenda are designed to help people with above-average […]
[…] to restore the state-and-local tax deduction are an obvious example, but they also favor other tax breaks that are utilized overwhelmingly by rich […]
[…] to restore the state-and-local tax deduction are an obvious example, but they also favor other tax breaks that are utilized overwhelmingly by rich […]
[…] efforts to restore the state-and-local tax deduction are an obvious example, but they also favor other tax breaks that are utilized overwhelmingly by rich […]
[…] wrote last year about Democrats favoring certain tax breaks that overwhelmingly benefit the […]
[…] obvious message is that it’s okay to help the rich when a) those rich people live in places such as California, and b) helping the rich also makes it […]
Democrats Support Huge Tax Breaks for the Rich, when the Rich make huge contributions to their re-election campaigns.
I do not understand from your piece why you like the Cadillac tax.
Any taxes that are targeted for behavioral modification should be eliminated, and that’s exactly what the”Cadillac tax” is. The whole idea behind the tax was to get people to opt for cheaper plans as a way of lowering average insurance cost to make it look like Obamacare was working through a slight of hand. It was an attempt to dishonestly massage the numbers.
The best solution is a Flat Tax and UBI.
The only problem is: How big should the UBI be?
I believe that level should be the Federal Poverty Level. That level should be enough to eliminate Federal Welfare completely.
States could then be as liberal with benefits as they want, if they want to pay for it.
Conservatives should argue for a UBI at levels at or below FPL, while liberals will argue for levels above FPL. Goldilocks sweet spot anyone?