Wednesday, September 9, 2020
New York Times op-ed: The Tax Cut for the Rich That Democrats Love, by Richard V. Reeves & Christopher Pulliam (Brookings Institution):
Why on earth ... are Democrats fighting — and fighting hard — for a $137 billion tax cut for the richest Americans? Mr. Biden, Nancy Pelosi and Charles Schumer don’t agree on everything, but on this specific issue they speak with one voice: the $10,000 cap on deductions for state and local tax (better known as the SALT deduction) must go. ...
Lifting it would therefore reverse one of the few good things about the 2017 bill. Almost 60 percent of the benefit of removal would go to the top 1 percent of households (of which 90 percent are white). For the superrich, the top 0.1 percent, repeal would make for an average tax cut of around $145,000 a year. In isolation, this change would be more skewed to the rich than the Republican tax bill as a whole.
What’s going on here? Senator Schumer and others are dressing up the cut in anti-Covid clothes, suggesting that it would help people in decimated cities like New York. This is specious. It is true that potential beneficiaries mostly live in higher-tax cities and states, but it is the richest residents who would reap most of the rewards. ...
The real motives here are surely political; for many Democrats in 2020, electoral calculations are more important than distributional ones. Unsurprisingly, repealing the SALT deduction appears to be popular among richer voters in blue cities and states.