The Corner

Capital Matters

Chuck Schumer Wants Democrats to Be the Party of Wealthy Elites

In the face of the progressive resurgence within the Democratic Party, Senate majority leader Chuck Schumer has been spending his time lobbying President Biden to embrace a pair of policies that would disproportionately benefit wealthy elites.

Even as Democrats struggle to come up with tax increases sufficient to at least pretend they are going to “pay for” trillions of dollars in expected new spending, Axios reports that Schumer is pushing Biden to remove the $10,000 cap on deducting state and local taxes from federal taxes (known as the SALT tax cap). 

Before the cap was put in place by the 2017 tax law, taxpayers in blue states such as California and New York could deduct all of their state and local taxes on their federal returns, meaning that in effect other lower-tax states had to subsidize their destructive fiscal policies. 

Because lower- and middle-income taxpayers tend to be more likely to just take a standard deduction when filing, the SALT deduction disproportionately benefited wealthier taxpayers who have a lot of itemized deductions and who live in states with high taxes and expensive real estate.

The Tax Policy Center has found that were the cap lifted, a majority of the benefits would go to the top 1 percent of taxpayers, and 96 percent of would go to the top 20 percent of taxpayers. Virtually no middle-class taxpayers would benefit from the repeal, which would reduce revenues by about $327 billion over the next five years.

One effect of the tax cap was that it allowed liberal states such as Schumer’s to hike taxes while minimizing the fallout from doing so. It’s no surprise that since the cap was put in place, people have been fleeing New York and California in droves for lower-tax jurisdictions — a trend that was accelerated by those states’ abysmal handling of COVID-19.

The SALT deduction is not the only area in which Schumer has the elites in mind. He has joined Senator Elizabeth Warren in calling for Biden to cancel up to $50,000 student debt by executive action — which is likely unconstitutional. 

Though this is a policy more favorable to progressive writers, it is not especially progressive. A Brookings Institution analysis of Warren’s campaign plan that would have relieved a similar amount of debt found that the top 40 percent of households would account for two-thirds of the annual savings, while the bottom 20 percent of households would receive just 4 percent.

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