POLITICS

House Democrats To Rich People: We Love You

In a boon for millionaires, Democrats are working to repeal an element of Donald Trump's tax law that actually increased the tax burden for the rich.

WASHINGTON ― Top Democrats have been fuming about President Donald Trump’s tax law ever since it was introduced two years ago, training most of their rhetorical fire on the bill’s handouts for large corporations and the ultra-wealthy. 

When Trump’s bill passed in December 2017, House Speaker Nancy Pelosi (D-Calif.) assailed it as a “brazen theft from the American middle class.” In the 2018 midterm elections, Democrats across the country said they would work to repeal the law, and the 2020 presidential primary has been dominated by new proposals to not only roll back the Trump law, but to create new taxes on the wealthy to reduce inequality and fund social projects. Pelosi continues to denounce Trump’s tax legislation as “the GOP tax scam for the rich.”

But none of this rhetoric has made its way into the actual governing priorities of House Democrats. In fact, with their majority, House Democrats have instead attacked the one provision of Trump’s tax law that actually imposed higher tax burdens on wealthy homeowners ― a cap on the total amount of state and local taxes, or SALT, they could write off from their federal tax bill.

On Wednesday, a key House panel approved a plan to repeal that measure and effectively cut property taxes for wealthy families by up to $10,000 per household next year, and much more in the years to come, with the benefit for some households swelling into the millions. The more expensive your house, the bigger your tax break.

The House Ways and Means Committee vote exasperated liberal tax experts, and the focus on this one part of the GOP tax law has infuriated even some Democrats.

“The benefit of this resolution goes to people at the very top,” Sen. Michael Bennet (D-Colo.) said in October, denouncing a similar measure moving through the Senate. “The way we approach these issues really matters to the American people so they know whom we are fighting for.”

The committee defeated amendments that would have blocked only the top 1% and top 10% from taking the deduction. 

House Speaker Nancy Pelosi (D-Calif.), shown here with Ways and Means Chair Richard Neal (D-Mass.), has denounced the Trump t
House Speaker Nancy Pelosi (D-Calif.), shown here with Ways and Means Chair Richard Neal (D-Mass.), has denounced the Trump tax cuts as a "GOP tax scam for the rich."

If the bill becomes law, more than half of the benefits would go to households with million-dollar incomes, according to the Joint Committee on Taxation, which evaluates tax bills for Congress. Meanwhile, the median household earned about $63,000 last year.  

When Republicans imposed the limit on deductions, they knew it would hammer residents of Democratic-led states that use high state and local taxes to pay for better schools and social services. The federal write-off for those taxes had shielded wealthier residents from the local impact; as of last year they could only deduct $10,000.

Democrats insist the provision harmed the middle class. As is often the case in politics, their argument hinges on a notion of middle class not strictly tethered to numbers. 

“Middle classes were particularly hurt in New Jersey,” said Rep. Bill Pascrell (D-N.J.), a chief advocate for the legislation. “One of my counties, Bergen County, average property taxes between $24,000 and $28,000.”

Bergen County’s median income exceeds $91,000; median home values are above $450,000. 

To counter criticism that they were establishing a handout for the rich, Democrats paired the SALT cap repeal with higher taxes on married household incomes above $496,600. 

“The way it’s offset is by increasing taxes on those wealthiest people so that the real benefit really does go to the people who are hurt most who can least afford it,” Rep. Dan Kildee (D-Mich.) told HuffPost. 

But it’s not quite that simple. Hiking the top marginal rate only partially offsets the cost of restoring homeowners’ power to write off all their local property taxes. To make the math work, the bill allows unlimited local tax deductions for only two years, costing so much revenue that it takes six years of the higher top rate to cover it.

Pairing the SALT cap repeal with higher income taxes does reduce the disparate regional impact of the GOP tax law, but its tilt toward the wealthy would remain. 

“This would exacerbate the biggest flaws of the Trump tax law,” according to Seth Hanlon, a senior fellow at the Center for American Progress, a liberal-leaning think tank. 

The Democrats’ new tax bill is what Capitol Hill insiders refer to as a “messaging bill.” It has very little chance of winning Republican support in the Senate and is unlikely to become law. Its primary purpose is to signal to voters who and what House Democrats care about ― a way to show what the party would do if it had control of the Senate and the White House.

And in that respect, many progressives are simply beside themselves with the message House Democrats are sending. With presidential candidates thinking of new ways to tax the rich and spend money on social programs for working people, House Democrats are focused on evening out the tax burdens faced by millionaires in different states. 

“There are more important priorities,” Hanlon wrote.

Kildee represents Flint, Michigan, an area not particularly harmed by the tax law’s local provision. But he supports getting rid of it anyway. 

“It’s not fair, no matter who is affected by it,” Kildee said.

CORRECTION: A previous version of this article stated that it would take five years of the higher top marginal tax rate to pay for two years of the full SALT deduction. It would take six years.

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