Friday, November 19, 2021

Democrat spending plan to give $billions to the wealthiest. It’s a blue state millionaire bailout.

by Rod Williams, Nov. 19, 2021 - In case you missed it and in case you think Republicans are the party of tax breaks for the wealthy, you need to be aware that the pending build back better plan contains massive tax breaks for the very wealthy.  The party that demands that the wealthy pay their fair share, is about to give a big tax break to millionaires.  Not all millionaires, but coastal millionaires, primarily. 

Now, I am not opposed, in principle, to tax breaks for the wealthy.  After all, the wealthy do not hide their money under a mattress.  Money not confiscated by the government is money that goes to work in the economy creating more jobs, a greater GNP, and more wealth.  The wealthy can only spend so much of their wealth, so any wealth in excess of consumption by the wealthy is an investment in the economy. Saving = Investment, and the wealthy "save" more.  Taxation, pulls money out of productive use, for the most part.  Not that we do not need some level of taxation, but taxing the wealthy makes less money available for economic expansion and less money available for the not-so-wealthy to borrow. 

The pending Biden tax break for the wealthy is particularly offensive because it targets which wealthy get the break.  It is a subsidy to the wealthy of California, New York, and other Democrat-run states. It is a tax break for the wealthy coastal elites. 

As the Washington Post explains it, "The second-biggest program in the Democrats’ spending plan gives billions to the rich."  

The House is expected to vote this week on President Biden’s Build Back Better legislation. The social spending bill includes investments in clean energy and affordable child care — but it also includes a $285 billion tax cut that would almost exclusively benefit high-income households over the next five years.

The measure would allow households to increase their deduction from state and local taxes from $10,000 to $80,000 through 2026, and then impose a new deduction cap through 2031. It’s the second-most expensive item in the legislation over the next five years, more costly than establishing a paid family and medical leave program, and nearly twice as expensive as funding home-medical services for the elderly and disabled, according to an analysis by the Committee for a Responsible Federal Budget.

What is the motivation for this? Currently, with the cap on the amount of deduction one may take on their federal taxes for money paid in local and state taxes, this provides an incentive for local and state governments to moderate their spending.  This also levels the playing field between fiscally responsible states like Tennessee which has no state income tax and spendthrift states like New York.  My perception is that Democrats want to punish the fiscally prudent states and encourage more states and localities to tax and spend. They want more of the nation to be like California, New Jersey, New York State, and New York City rather than like Tennessee and Florida.  

Next time you hear some economic illiterate repeat the claim that the Republican Party is the party of the wealthy and the Democrat Party is the party of the "working man," or the "common man," you might want to ask them to explain this massive tax break to the wealthiest. 

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