SALT in the Democrats’ Wounds

Today on TAP: Why are Democrats cutting taxes for the rich, at the expense of building back better?

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The headline on page one of today’s New York Times is the stuff that progressive dreams are made of: “Trucker Ousts Power Broker in New Jersey.” Edward Durr, a political novice and a truck driver for a furniture chain, defeated the longtime New Jersey Senate president, Stephen Sweeney, by 2,298 votes, in his South Jersey state Senate seat.

The only problem is that Durr is a Republican and Sweeney is a Democrat. And there in a nutshell is the Democrats’ dilemma—the loss of the working class.

Another indicator: As part of the long-awaited budget deal, Democrats from high tax/high public service states, led by Chuck Schumer of New York, demanded that the cap on state and local tax deductions against the federal income tax be lifted from its present ceiling of $10,000 to $72,000. Schumer prevailed. This will help no working-class people, but it will help lots of affluent homeowners save on their federal taxes.

More from Robert Kuttner

The revenue cost is about $300 billion over the four-year budget window. But thanks to the weird budget scoring rules, the nominal cost more than disappears over ten years because the cap was set to entirely expire in 2025, which would have cost even more. The other tax provisions in Build Back Better will raise some $2 trillion from the rich over a decade. Still, you could pay for a lot of public investments with $300 billion.

The politics are tricky here, because the cap was a gift from Donald Trump to screw taxpayers in blue states. Prior to Trump’s 2017 tax cut, there was no cap. Taxpayers could deduct all of their property taxes against the federal income tax. In a law that cut taxes for the rich in every other respect, Trump found a way to raise taxes for affluent Democrats, since high housing prices and high property taxes for the upper middle class are found almost uniformly in states like New York, New Jersey, Connecticut, Massachusetts, and California.

The irony is that if Biden can get most of Build Back Better, provisions like child care, free community college, a permanent child allowance, and paid family leave could do a lot to win back working-class affections. If only.

There is one silver lining in this story. The New Jersey power broker whom the Republican trucker took out was the epitome of a corporate Democrat, who blocked a lot of progressive legislation.

Politics does make strange bedfellows.

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