Democrats Might Create A Tax Break For Union Membership In Budget Bill

The tax deduction they're considering would be more useful to union members than the one Republicans repealed in 2017.

Union members could benefit from a tax break that Democrats are considering as part of their new $3.5 trillion budget plan.

Labor groups are pushing lawmakers to include a provision that would allow workers to deduct the cost of union dues from their taxable income. Such a tax break could defray the cost of union membership and, the thinking goes, encourage more workers to join unions.

Senators are considering the idea, according to a Democratic aide.

One union source, who spoke on condition of anonymity, said organized labor groups have urged Democrats to make the tax benefit an “above the line” deduction with the IRS. That means workers would be able to take advantage of it regardless of whether they itemize their tax deductions or take the standard deduction.

Lawmakers are also considering the possibility of creating a tax credit for union dues, which, unlike a deduction, would reduce a filer’s tax liability dollar for dollar. Bloomberg Law was the first to report on discussions of a union dues tax break.

Senate Democrats passed an initial budget outline this week that would allow them to pass a final bill later this year using the special “budget reconciliation” process, which requires a simple majority vote instead of the usual 60 to break a filibuster.

Democrats view the bill as possibly their final chance to enact major changes for years and are considering a wide range of policies. They’ve offered only a broad outline of major elements of the bill, including “pro-worker incentives and worker support.”

“A deduction for union dues could be a modest way to encourage union membership through the tax code.”

If such a break came to fruition, the policy would improve on a tax deduction that union members had until Republicans killed it in 2017.

Workers used to be able to deduct union dues, but they could only do so if they had enough other eligible deductions that it was worthwhile to file an “itemized” tax return ― and even then, the eligible expenses had to amount to more than 2% of the tax filer’s adjusted gross income.

Republicans eliminated the break on union dues when they did away with an entire category of miscellaneous deductions. It was one of several changes Republicans made in their effort to simplify the individual tax code as part of the Tax Cuts and Jobs Act, which slashed corporate taxes. The most important simplification for individuals was a much bigger “standard deduction” that has resulted in far fewer households filing itemized returns.

That’s one reason why Democrats are considering union dues as an “above the line” deduction, which allows taxpayers to subtract certain things — such as up to $250 for teachers’ classroom expenses — above the line on tax form 1040 where filers report their adjusted gross income.

Alexandra Thornton, senior director of tax policy at the left-leaning Center for American Progress, told HuffPost that an above-the-line deduction for union dues would bring more tax parity between workers and businesses. Employers, she noted, can already deduct the expenses they incur bargaining with and even resisting unions, since it’s considered a cost of doing business.

If the same logic applied to workers, union dues would be deducted from the worker’s earnings for tax purposes.

“When you think about the union and what it does for workers, they’re basically negotiating salary and benefits. So it’s a cost of getting your income if you’re a worker,” said Thornton, who outlined a proposal for the above-the-line deduction in a 2019 paper.

She called making union dues tax deductible “a fairness thing.”

Sen. Bernie Sanders (I-Vt.), chairman of the Senate Budget Committee, has been one of the biggest boosters for labor law reform.
Sen. Bernie Sanders (I-Vt.), chairman of the Senate Budget Committee, has been one of the biggest boosters for labor law reform.
Bill Clark via Getty Images

Thornton said the deduction would also be a small way to encourage union membership through tax policy. Union density in the U.S. has declined for decades, with just 10.8% of workers now belonging to a union. That’s roughly half the rate in 1983, when the government first started tracking. (Most HuffPost employees are represented by a union, the Writers Guild of America-East.)

The cost of dues varies from one union to the next; they often fall between 1% and 2% of a worker’s gross wages. How much a worker saved through an above-the-line tax break would of course depend on how much they paid in dues and which tax bracket they fell in. For a worker earning $60,000, the savings could translate into a couple of hundred bucks a year, thereby lowering the effective cost of being represented by a union.

Unions are pushing Congress to implement sweeping changes to labor law to encourage more unionization through the Protecting the Right to Organize Act, or PRO Act.

Because the legislation doesn’t have the necessary votes to overcome a Senate filibuster, Democrats are considering trying to implement parts of it through budget reconciliation ― in particular, a provision that would create monetary fines against employers that violate labor laws. One of the biggest boosters of the PRO Act is Sen. Bernie Sanders (I-Vt.), chairman of the Senate Budget Committee and a lead crafter of the budget bill.

The union dues tax deduction proposal is not part of the PRO Act, but some lawmakers have been pursuing it separately. Sens. Sherrod Brown (D-Ohio), Bob Casey (D-Pa.) Patty Murray (D-Wash.) and Chuck Schumer (D-N.Y.) sponsored a standalone version of the union dues deduction earlier this year.

In a statement to HuffPost, Brown’s office said his first priority for workers would be to pass the PRO Act in its entirety, but suggested he’s open to other options.

“Senator Brown will never give up fighting for the PRO Act,” a spokesperson said. “But, when an opportunity to pass pro-worker policies comes along, you go as big as you can.”