August 6, 2020 - 9:00 pm
Some Democrats put more importance on passing a tax break for the wealthy than on approving another relief package designed to help average Americans survive the coronavirus crisis.
Nancy Pelosi &Co. bristle at the notion that the $3 trillion virus package the House passed in May is loaded with progressive pork. But it is. Consider that, as House Democrats and Senate Republicans attempt to reconcile their competing proposals, one of the sticking points is an effort by congressional liberals to restore a tax deduction that primarily benefits top wage earners.
What does that have to do with helping the disadvantaged and middle class endure the pandemic?
At issue is the federal deduction for state and local income taxes that was capped at $10,000 in the 2017 Republican tax reform bill. The write-off had previously been unlimited, allowing wealthy residents of high-tax blue states to shift a significant portion of their local or state tax burden onto taxpayers in other states. This helped big-spending Democrats in states such as New York or California disguise the true costs of their profligacy.
Senate Democrats, like Minority Leader Chuck Schumer, are now insisting that the proposal be included in any compromise relief bill. The irony hasn’t gone unnoticed. “The Democratic leader,” Senate Majority Leader Mitch McConnell said, “is still refusing to let struggling Americans get another dime unless he gets a massive tax cut for wealthy people in blue states that has nothing to do with the coronavirus.”
That’s not partisan hyperbole. The Wall Street Journal reports that the Tax Policy Center, a Washington “research group run by a former Obama administration official,” calculates that the top 1 percent of wage earners will reap 57 percent of the benefit proposed in the House legislation. Indeed, New York and other high-tax states have seen wealthy residents relocate to more favorable tax climes as a result of the Trump tax bill.
“We’re losing taxpayers when we need them most,” said Rep. Tom Suozzi, a New York Democrat who is pushing the restoration of the generation tax break. “The people who can’t afford to move or just don’t want to move are the ones left behind holding the bag.”
Rep. Suozzi deserves credit for candor, whether intended or not. The unlimited state and local deduction allowed big-spending politicians to raise taxes knowing the federal government — read: taxpayers in more fiscally responsible states — would defray the costs. If Rep. Suozzi and other proponents of the subsidy are worried about taxpayer flight, they should reconsider their devotion to continually overfeeding the public sector and instead create a more attractive tax environment for their residents.
In the meantime, Mr. McConnell and Republicans shouldn’t budge on their resistance to including this awful proposal in any deal on the next relief package.