This newspaper has long argued that Democrats should leave in place a cap on deductions that wealthy taxpayers can claim based on their state taxes—the one good part of the Republicans’ 2017 tax-cut package. Now Democrats are nonetheless on the verge of dramatically raising that cap, a move that is being rightly criticized as a gift to the rich. It’s not too late to get it right and leave the cap alone.
The 2017 tax cuts were a boondoggle that will cost America for years, all so the GOP could reward its wealthy benefactors. The claim that the cuts would pay for themselves through economic growth was always bunk; the cuts are now estimated to add almost $2 trillion to the deficit over a decade.
But the Republican coddle-the-rich plan did include one reasonable provision: a cap of $10,000 on the amount that taxpayers could deduct from their federal taxes based on what they pay in state taxes. It takes a good deal of wealth to rack up a $10,000 state tax bill, so that provision would only hit the rich. Democrats alleged that the provision was meant to punish blue states like New York and California, which have both lots of rich people and high state taxes.
But whatever the dark motives behind it, the provision made sense. As we said in an editorial last May, the cap constituted one bright spot in what was otherwise a collection of mostly bad ideas. We encouraged the Biden administration to leave the cap in place and we continue to believe that’s the right policy.
Unfortunately, a provision raising that cap to $80,000 is currently included in President Joe Biden’s social spending and climate bill that passed the House on Friday—mainly because powerful Democrats like Senate Majority Leader Chuck Schumer of New York want the cap raised in order to placate their wealthy constituents and keep their current state tax structures in place.
That provision might serve Schumer but not the country. The Democrats’ often-wrong left flank is right on this one. “You can’t be a political party that talks about demanding the wealthy pay their fair share of taxes and then end up with a bill that gives large tax breaks to many millionaires,” Sen. Bernie Sanders of Vermont said. “You can’t do that. The hypocrisy is too strong. It’s bad policy, it’s bad politics.”
For proof of what bad politics it is, consider this quote from none other than Sen. Rick Scott, R-Fla., chair of the National Republican Senatorial Committee: “If you look at the amount of money they are going to give to rich people, it’s staggering.”
America already has one party that coddles the rich. It doesn’t need a second one. The Senate should revamp the bill to leave the cap alone.