Dems Somehow Pretend This Mostly Helps The Middle Class

This report was written by David Sirota and Andrew Perez

For years, Democratic lawmakers fought the GOP lie that cast estate tax cuts for billionaires as efforts to rescue family farms. But in this new era of ubiquitous misinformation, the same Democrats are waving a white flag in the battle against anti-tax bullshit. They are ripping a page out of the GOP’s “death tax” playbook and conjuring a new lie, this one depicting tax breaks for affluent donors as a defense of working-class homeowners.

In the process, Democratic leaders show they fight far harder for the donor class than they do for the working class.

At issue is the $10,000 cap on state and local tax (SALT) deductions that was included in President Donald Trump’s 2017 tax bill. The cap was designed to limit the amount of state and local tax payments that households not using the newly expanded standard deduction can write off from their federal taxable income.

Earlier this month, seven Democratic governors signed a letter demanding President Biden fully repeal the cap. Among the signatories were a billionaire and five multimillionaires, including New York Gov. Andrew Cuomo, who was freshly enriched by a lucrative book deal. The gubernatorial moguls asserted that “middle-class Americans are struggling under this federal tax burden.”

That letter was followed up by Cuomo and New York state lawmakers creating a special SALT deduction workaround for the managers of hedge funds and shell companies.

Then, nearly every New York Democratic lawmaker in Congress signed their own letter threatening to vote down President Biden’s infrastructure legislation unless it fully repeals the SALT deduction cap.

And then came the creation of a whole new bipartisan SALT Caucus — a group of lawmakers organized to fight for the new tax breaks.

Wiping Out Revenue From A Corporate Tax Hike

Notably, members of Congress are not pushing a far more progressive reform of the SALT cap. They are also not pushing to merely raise the cap so that it provides a few more deductions to the lower end of top earners. Instead, they are demanding a full repeal of the cap, which would make sure the maximum amount of deductions flow to the richest sliver of the population.

They are doing this all while insisting that their crusade is designed to restore tax breaks that “ensured that New York State middle-class families were not taxed twice on their income,” as the New York congressional members wrote.

If this rhetoric seems familiar, that’s because it is exactly how Republicans dishonestly sold estate tax cuts. In that fight, the GOP has similarly used the middle class as the human shield for tax policies that deliver most of their financial benefits to the super-rich. Now Democrats are using the same tactic to try to morally justify giant tax deductions that primarily benefit the wealthy.

The progressive-leaning Center on Budget and Policy Priorities reports that “the top 1 percent of households would receive 56 percent of the benefit of (a SALT cap) repeal, and the top 5 percent of households would receive over 80 percent of the benefit, while the bottom 80 percent of households would receive just 4 percent.”

A Tax Policy Center report found that had the caps been repealed in 2018, that would have benefited almost all households making more than $1 million — and the average annual benefit among that group that year would have been $47,000.

The same report found that just 2 percent of households making between $50,000 and $75,000 would have benefited, and the average benefit would have been just $250. Just 16 percent of households earning between $100,000 and $200,000 would receive any benefit — and that small handful would see an average tax cut of $780.

If you only listened to Democratic lawmakers, you might think these numbers are dramatically different in Democratic states with higher state and local taxes — but “there is no state where this is a primarily middle-class issue,” reported the Institute for Taxation and Economic Policy.

As just one example: The group’s state-by-state analysis found that in New York, a SALT deduction cap repeal would provide 85 percent of its benefits to the richest 5 percent.

Eliminating the SALT deduction caps is no small budgetary matter: CBPP estimated a repeal could cost the government $600 billion over nine years. For comparison, that’s roughly equal to the revenue that would be generated over 15 years from Democrats’ reported plan to raise the corporate tax rate from 21 percent to 25 percent, instead of the 28 percent proposed by Biden.

Those revenues were supposed to fund desperately needed roads, bridges, and other public infrastructure, but if the SALT Caucus has its way, they could instead help finance new write-offs for wealthy people’s property taxes.

Fighting For Wealthy Donors While Surrendering A $15 Minimum Wage

So why would Democrats choose to use so much political capital to fight this particular fight when they have so many other urgent priorities? Why would they go so far as to threaten to take down the infrastructure bill championed by their own party’s president?

It almost certainly has something to do with beneficiaries of the SALT cap repeal being the type of people who tend to bankroll political campaigns.

As a 2016 Demos study found, the donor class tends to be far wealthier, whiter, and more conservative than the general population. A full 45 percent of donors giving more than $5,000 to campaigns have a net worth of more than $1 million — and those same folks just so happen to be the big winners of a SALT cap repeal.

This is why none of the embarrassing math about the SALT cap repeal seems to matter to the congressional Democrats who are demanding it. They just continue to say over and over and over again that it is a middle class initiative, expecting an audience of lobotomized cable news viewers to trust that is true, even though it is demonstrably false.

The repetition of this lie is so incessant and intense that Brookings’ Richard Reeves has asked whether he can simply program his Twitter account to auto-tweet this chart “every time a House Democrat urges this massive tax cut for the rich.”

The Democrats’ drum beat is eerily reminiscent of Republican presidents like Trump and George W. Bush constantly insisting with straight faces that slashing billionaires’ tax rates was an earnest effort to help workers. We’ve come to expect such fantastical tax lies from the GOP, but the Democrats mimicking the mendacity is a mask-off moment for the party and for the affluent subset of its voters who cheer on this kind of behavior.

Remember, only a few weeks ago, these same Democratic lawmakers now throwing a tantrum on behalf of their affluent donors refused to issue any similar line-in-the-sand ultimatum for a $15 minimum wage that would have benefited millions of workers. Instead, they reserved the real power moves to demand tax deductions that are absurdly regressive.

In fact, according to Brookings Institution data, a full repeal of the cap on SALT deductions would actually be more regressive and more of a pure giveaway to the wealthy than even the notoriously regressive Trump tax cuts that the Democratic Party (rightly) spent years vilifying.

“No SALT, No Deal”

This dichotomy between surrendering the $15 minimum wage and playing hardball for regressive tax cuts is a crystal clear expression of who many Democrats in Washington think they first and foremost represent — and the spectacle proves that it’s not working-class voters.

If you needed any more proof of that, consider that two Democratic lawmakers who are leading the battle to give wealthy families new SALT deductions — New York Rep. Tom Suozzi and New Jersey Rep. Tom Malinowski — both complained during COVID relief negotiations that the direct payment portion wasn’t restrictive enough.

Late last month, Suozzi kicked off the SALT campaign, issuing a press release declaring: “No SALT, no deal.” As he noted in the release, “The cap on the SALT deduction has been a body blow to New York and middle-class families in New York.”

Meanwhile, days after Biden signed Democrats’ COVID spending bill, Suozzi said: "I would love to see these $1,400 stimulus checks targeted more towards people and less money going to people that are actually working right now. But, you know, we couldn't get that. I can't get everything I want."

Malinowski, for his part, said in January, “If you have a set amount of money to spend, I’d rather fund Biden’s child tax credit proposal than to write checks for couples making $200,000 who have continued to earn through the COVID crisis.” He added: “Heck, I’d rather give paramedics and nurses and transit workers hazard pay.”

As The Daily Poster reported, much of the conversation in Washington around better targeting of the checks would have instead cut off aid to millions of middle-class people. The White House considered phasing out checks for individuals making more than $50,000 and married couples making more than $100,000 — a change that would have denied aid to 40 million Americans.

These Democratic lawmakers and so many others in the party questioned whether people who earned more than $50,000 really needed one single pandemic survival check for $1,400 (instead of $2,000 as Democrats had promised). Weeks later, these same Democrats are demanding that Congress provide permanent new tax breaks to millionaire homeowners.

And somehow, they are maintaining a straight face as they pretend such giveaways are for the middle class, even when the data prove the exact opposite.

Millionaires Are Not Persecuted By A Tax Code That Enriches Them

To be sure, Trump’s motive in capping SALT deductions in the first place was mean-spirited. He wasn’t aiming for sound tax policy as much as he was trying to punitively punish blue states, whose state and local levies tend to be higher.

But Trump’s vengeful motives are less significant than the policy — and the Washington Post is undeniably correct in pointing out that the SALT deduction cap “was one of the few aspects of the Trump [tax] bill that actually promoted tax progressivity.”

Of course, many of the most outspoken Democrats pushing the SALT cap repeal represent higher-income districts, and there is no doubt that many of their affluent constituents feel genuinely aggrieved. But their concerns are patently absurd when you consider how much the tax code is already subsidizing them.

Let’s remember that the existing $10,000 cap on SALT deductions still disproportionately benefits the rich. Indeed, “around three-quarters of the benefit goes to families in the top fifth” of income earners, according to Brookings.

Those benefits are in addition to an existing tax law that lets families write off interest on the first $750,000 of their home mortgages — a deduction that delivers 80 percent of the benefits to the top one-fifth of earners.

The tax code offers a separate, lower tax rate for capital gains and dividends than for earned income at the highest tax bracket — a discrepancy that delivers 75 percent of its benefits to households making more than $1 million a year.

And all of that is in addition to Trump’s cuts to taxes on income, pass-through corporations, and real estate — all which disproportionately benefit many of the same rich folk who will now insist with a straight face that they are being unduly persecuted by the SALT deduction cap.

Some of their feelings of aggrievement are just an expression of unbridled greed. But some of it also reflects a genuine ignorance of just how good they have it compared to everyone else — and that ignorance is fueled, in part, by the popular culture and the press. After all, there is an entire cottage industry in media and Hollywood that has pretended affluent people are persecuted or struggling.

Back in the early 2000s, West Wing epitomized this when presidential speechwriter Sam Seaborn whined about having to pay a lot in taxes when he was making $400,000 as a corporate lawyer.

A few years later in the lead-up to the financial crisis, the Washington Post insisted that a family making $300,000 is just “squeaking by.” Fast Company has told readers about a family supposedly living “paycheck to paycheck” on $325,000 a year. CNBC insists that it costs $350,000 to be middle class in a big city. And the New York Times has insisted that earning only $500,000 a year makes it difficult to live in a Big Apple where the median annual household income is $60,000.

There is no doubt that the cost of living has increased in America, making it more expensive to live and own a home in major population centers. There is similarly no doubt that even families living in suburban McMansions typically live more modest lives than tycoons with private jets making billions.

But tax data and basic arithmetic should leave no doubt that the mid-six-figure family is far above the “middle” in an America whose median household income is $68,000. That same tax data and arithmetic also show that such a family is not financially persecuted, no matter how much President Bartlet’s aides, Acela corridor newspapers, or today’s Democratic proponents of a SALT cap repeal want you to think otherwise.

The good news is that — at least for now — the Biden administration isn’t echoing the lies. And Rep. Alexandria Ocasio-Cortez is defying her own New York Democratic colleagues and using her platform to tell the truth about the SALT cap repeal proposal.

"I think it's just a giveaway to the rich," she said, "and I think it's a gift to billionaires."

The data proves AOC is indisputably correct. But in this age of misinformation, those facts are being drowned out by a new Democratic megaphone now blasting the same kind of tax lies long blared by the old Republican noise machine.

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