The Biden plan's tax cut optics look awful because they are awful

·5 min read
A donkey.
A donkey. Illustrated | iStock

Democrats are just possibly in the final stages of passing the Build Back Better plan, and — if you count child care and pre-K as separate programs, which makes sense — the single largest budget item is a big tax cut for the rich. Some progressive triumph, huh?

As Alyssa Fowers and Simon Ducroquet explain at The Washington Post, this comes from an increase in the deduction for state and local taxes (going from $10,000 to $80,000), which will only benefit those already rich enough to pay more than $10,000 in state and local taxes each year. Politico reports several Democrats are despairing at how bad it looks.

And so they should, because it looks — and is — awful. Yet that's only one way in which Democrats are stomping on their own message because their own members are in hock to vested interests. The party's corruption is one of its own biggest obstacles to political success.

First, some background. The state and local tax deduction (often called SALT) was capped at $10,000 as part of the Trump tax cuts, both to keep the headline cost down and as a thumb in the eye of wealthy, blue-state liberals. People like that contribute tons of money to Democratic campaigns and political committees and therefore tend to have the ear of the Democratic leadership and swing vote "moderates" like Rep. Josh Gottheimer (D-N.J.).

As a policy priority, boosting the SALT cap to $80,000 is utterly indefensible. If you are paying $10,000 in state and local taxes you are by definition doing very well indeed. If you are paying $80,000 — substantially above the entire household median income — you are in all probability in the top 1 percent. The Post estimates the bottom 40 percent of Americans will see no benefit whatsoever from this change and the next 40 percent almost nothing, but the top 1 percent will average $14,900 less in taxes per year.

Incidentally, several members of Congress pushing this change themselves own huge homes in high-tax jurisdictions and therefore would benefit personally from moving the cap. All that is perfectly legal, of course, but it's practically the dictionary definition of corruption: A small, wealthy minority gave themselves a giant policy victory.

Also consider is what isn't in the bill: an aggressive prescription drug price reform. Democrats do have an ultra-complicated pile of half-measures on this front — roughly, they would cap out-of-pocket spending in Medicare Part D at $2,000, penalize drug makers who hike their prices faster than the rate of Medicare inflation, and allow Medicare to negotiate directly with pharma companies on a handful of drugs — which seems to be a modest improvement on the status quo.

But "modest" is the operative word, particularly for the negotiation portion. Medicare would be allowed to negotiate on the price of just 10 drugs at the start, which rises to a mere 20 over time. (Previous versions of the bill had those numbers at 25 and 50, respectively.) As a result, this will save only $250 billion over 10 years — down from $450 billion, which itself wasn't much.

As I've previously explained, Americans pay roughly twice what other rich countries do on drugs because we get mercilessly price-gouged. That's probably why allowing Medicare to negotiate all drug prices polls at 9-1 approval, and that in turn is why Democrats have been running on drug price reform since 2006. But every time there's a chance at serious reform, corporate lobbyists strike. They swarm over Congress saying, we'd like to continue ripping off the government, uh, I mean, something something innovation, and the corporate stooge caucus springs into action. For all its talk, the Democratic Party is so deep in the pocket of the pharmaceutical industry that this lame quarter-measure of 20 negotiations will be counted as a victory.

Finally, consider the paid family and sick leave program. This was taken out of the Biden agenda last month, but it has since come back in an attenuated form (just four weeks per year instead of 12). As I've written, this plan too suffers from a monstrously complicated design. It will leave out something like a third of all parents and create a paperwork nightmare for both individuals and the government. Why? Because a bunch of life insurance companies have been greasing the palms of Rep. Richie Neal (D-Mass.), chair of the House Ways and Means Committee, for the last 20 years. Neal made Sen. Kristen Gillibrand's (D-N.Y.) simple and straightforward FAMILY Act more complex, less effective, significantly more expensive for Americans, and a new corporate entitlement for his insurance industry buddies.

The Democratic Party faces a dire political threat. Republicans are preparing to cheat their way to victory in the House through gerrymandering; one in five election officials report being threatened because of their jobs; and, needless to say, the last GOP president tried to overturn a democratic election. Passing something good so President Biden can credibly claim to have kept his campaign promises and so the rest of the Democratic Party has a decent record to run on in the midterms next year must be a vital part of any strategy to counter this threat.

Yet the needs of the party and American democracy itself are running headlong into the deep corruption among a large swathe of Democratic lawmakers. It isn't just a handful of members in swing states who claim they need to coddle special interests to win, either. Neal is from deep-blue Massachusetts, and several Democratic members from safe seats are pushing the SALT cap hike — including Reps. Tom Suozzi (N.Y.), Jamie Raskin (Md.), and House Speaker Nancy Pelosi (Calif.) herself. It's an open secret that, often, conservative Democratic Sens. Kyrsten Sinema (Ariz.) and Joe Manchin (W.Va.) are serving as cover for fellow Democrats who oppose popular, democratic policies but don't want to say so in public.

Maybe they just can't help themselves. Whatever the reason, given a choice between preserving republican self-government and being amoral, money-grubbing corporate puppets, it's clear what many Democrats choose.

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