Pluralistic: 28 Apr 2021

Today's links

A long driveway leading to a palace; at the top of the drive is a kicking donkey, with overlaid coloring that suggests the Democratic Party mascot. The sky over the palace has been filled with hundred-dollar bills of various sizes, with the same Democratic Party kicking donkey in place of Benjamin Franklin.

Dems want to give $600b to the one percent (permalink)

Remember when a group of establishment Congressional Democrats vowed that they would add means-testing to the emergency relief checks so that "the money wouldn't go to people who didn't need it?"

The argument that federal relief should target the 99% and not the 1% is a familiar – and defensible – one. The Trump #taxscam handed trillions to the richest Americans, triggering stock buybacks:

and a superyacht bubble:

But it delivered no meaningful benefit to everyday Americans.

Now, that said, there was one area of the Trump tax bill that targeted the wealthy: the State and Local Tax (SALT) Cap, which capped SALT deductions at $10,000.

That meant that taxpayers could only write off the first $10k of their state and local tax. In practice, this affected very wealthy Americans, predominantly those living in large, high-property-value cities, which has substantial overlap with rich Democratic donors.

That's the only reason for Trump's SALT Cap, and it's a stupid and spiteful reason: passing a tax that targets the wealthy because of partisanship is bad.

But taxing the wealthy is, in fact, good. Trump set out to do something bad and did something good, in other words.

Now, a group of Dems – many of the same Dems who held up the stimulus because they didn't want to send $1600 to the underserving wealthy – are holding the $2t infrastructure plan hostage and demanding that the SALT Cap be repealed.

And while they claim a SALT Cap repeal would benefit the middle class, it disproportionately and vastly benefits the ultra-rich: 86% of the benefit of the repeal would go to the top 5% of US earners.

Under a SALT Cap repeal, households earning more than $1m/year getting $48k in extra cash:

Meanwhile, 98% of middle-class households with incomes of $50-75k would get nothing. The 2% who got something would average $250.

Lifting the SALT Cap is a powerfully regressive move. It is three times more regressive than the Trump tax plan – that is 300% more tilted in favor of the wealthy.

A bar chart entitled Share of Total Federal Tax Change that breaks out the proportional benefit of both a SALT Cap repeal and the Trump cuts by decile, showing decisively that a SALT CAP repeal is far more regressive than the Trump cuts.

Lifting the SALT Cap has nothing to do with the middle class. For starters, the SALT deduction only applies to people who itemize expenses, rather than taking the standard deduction. 92% of the top 1% of earners do that (it's only 5% of the 40th-60th earning percentile).

It's possible that there are people in especially expensive cities in "blue states" for whom the SALT Cap is a burden – people at the lowest threshold of beneficiaries of a repeal who really are financially stretched.

If that's our concern, there's an easy, non-regressive fix – raise, but don't repeal, the cap. If $10k is too low, make it $15k, or even $20k. But by making the cap unlimited, we ensure that the wildly disproportionate beneficiaries of the change are the ultra-ultra-ultra rich.

As David Sirota points out, this maneuver – claiming that a tax-break for the super-rich is really about the middle class – comes straight out of the GOP playbook. It's how Republicans sold cuts to the estate tax:

That move – like the ones Dems are making now – made it much easier for the ultra-wealthy to make vast, tax-advantaged intergenerational wealth transfers, creating the rentier dynasties that now crouch on the political system's chest, sucking up all the oxygen.

Just to be clear: "there is no state where this is a primarily middle-class issue."

The cuts will transfer $600b, primarily to the highest earners, over the next 9 years:

That's $600b worth of giveaways to the rich from the party that couldn't muster the political will to include a $15 minimum wage and that fretted endlessly about whether the $1400 stimulus (down from $2000) might go to someone in the middle class.

And while the "SALT Caucus" of Dems who are holding the infrastructure bill hostage to the super rich are a rogues' gallery of establishment, corporate Dems from high-tax states (Chuck Schumer, Nancy Pelosi, etc), the roster includes some otherwise progressive heroes.

Progressive Californian lawmakers like Ro Khanna and Katie Porter have both called on Biden to lift the cap entirely (though they've stopped short of promising to hold up the infrastructure bill), as have NY Democratic "insurgents" like Jamaal Bowman and Mondaire Jones.

Some progressives, though, have kept the faith. Even as the entire NY Democratic caucus signed a letter calling for a SALT Cap repeal, AOC and Kathleen Rice refused.–and-slash-more-taxes-for-the-rich/

Trump's tax cuts supercharged inequality and created a destructive, speculative finance-bubble by handing permanent tax gifts to the people who needed them the least. A full repeal of the SALT Cap is even more plute-friendly than Trump's plan.

The fact that Trump passed a SALT Cap out of spite is irrelevant. America's inequality crisis demands an end to regressive measures, including the special treatment of capital gains and carried interest, which gives tax advantages to speculators and punishes wage-earners.

Democrats will not win elections or change our political conversation with business-as-usual handouts to the super-rich in the hopes of winning campaign contributions. They have the money, we have the people.

Dems cannot win by being the party of the wealthy. The Republicans have that one on lock.

(Image: Andrey Korchagin, CC BY-SA)

This day in history (permalink)

#15yrsag Sony screwing artists out of iTunes royalties, customers out of first-sale;_ylt=AowpM.my63biaeu.FU8A_rRxFb8C;_ylu=X3oDMTA5aHJvMDdwBHNlYwN5bmNhdA–

#1yrago Read the prologue of "The Lost Cause"

Colophon (permalink)

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