Right On: Republicans raise taxes on the wealthy, Democrats hyperventilate

Composite image using elements from Pixabay, St. George News

OPINION — So who is the party of the middle class?

Democrats spend every waking moment reminding voters that they are the party of the little guy, the middle class, while calling Republicans corporate fat cats.

When Republicans passed their recent tax reform – no Democrats voted for it – Nancy Pelosi loudly proclaimed employees would receive only “crumbs,” that only big business would reap a windfall.

As of last Friday noon, 263 companies had promised their employees bonuses, raises, 401k contributions or a combination of the three that will start showing up in paychecks this month. And many companies are making multi-million dollar or even billion dollar investments in new plants and equipment.

Trying to salvage some way to find fault with the new Republican law, Democrats are now hyperventilating about higher taxes on the wealthy. Take a moment and read that last sentence again: Democrats are hyperventilating about higher taxes on the wealthy.

The Republican tax reform limits the state and local tax deduction to $10,000 per year while before there was no limit. When taxpayers deduct state and local taxes, sometimes referred to as the SALT deduction, from their income, it reduces their federal income tax.

Over 90 percent of those who will lose some of their deduction have incomes in excess of $100,000. This hasn’t prevented leading Democrats from taking up their cause.

New York Gov. Andrew Cuomo calls the Republican tax reform a “war on blue states.” Democratic senators representing the 10 states with the highest per capita state and local taxes have echoed Cuomo, denouncing tax reform’s impact on their wealthy taxpayers.

Can’t these Democrats see their hypocrisy in defending the rich? Just last year Bernie Sanders was claiming these same folks weren’t paying their fair share.

Democrats are howling now because in states they control, tax-and-spend politics have made state and local taxes a runaway train. Take California as an example.

California’s top income tax rate is 13.3 percent. Folks paying this top rate – think Silicon Valley and Hollywood –also pay the top federal tax rate of 37.9 percent. Add to that some of the highest property taxes in the country.

For these high-income Californians, federal income tax is reduced by 37.9 percent of their state and local taxes. This discount made it all too easy for California Democrats to raise state and local taxes in the past. Why not? The rest of the country had to make up the difference.

Limiting the deduction has caused some soul searching among more thoughtful Democratic politicians.

When he introduced his 2018-19 budget proposal, California Gov. Jerry Brown said, “People with higher incomes pay a lot more money and some of them may be tempted to leave.”

The Sacramento Bee reports:

Democratic state lawmakers are worried because California relies so heavily on the income taxes it collects from high earners to fund government services. The state’s wealthiest 1 percent, for instance, pay 48 percent of its income tax, and the departure of just a few families could lead to a noticeable hit to state general fund revenue.

Do the math. California will collect over $90 billion in personal income tax this fiscal year, about $45 billion from its 1 percent. These taxpayers will avoid over $17 billion in 2017 federal income tax. Add in their property taxes and they’ll avoid billions more.

Somehow I find it hard to feel sorry for these high income Californians, especially since the rest of us have been subsidizing their $17 billion tax break.

California’s dilemma applies to all high tax states. New York’s 1 percent pay 40 percent of its $40 billion in income taxes. Average property taxes in New York’s Westchester County are $10,000.

New York and other high-tax states will either have to find ways to reduce their tax burdens or lose wealthy taxpayers to lower tax states.

Do blue states have a fairness argument?

Democrats point out, correctly, that blue states pay more in federal taxes than they receive in federal spending. They argue that the new tax law unfairly increases this imbalance.

Blue states pay more federal income tax because most blue states have above-average per capita incomes and are home to a disproportionate share of the nation’s 1 percent.

Instead of complaining, Democrats should be thanking Republicans for tackling two liberal policy goals.

First, Republicans lowered the federal tax rate for high-income taxpayers with the right hand but raised their taxes with the left hand by limiting the deduction for state and local taxes. How this nets out for any one high-income taxpayer depends on the state; for many, their federal tax bill will actually go up. But since income tax rates were reduced for the rest of us, the overall effect is to make federal taxes even more progressive, a longstanding liberal policy goal.

Second, Democrats should be telling blue state taxpayers to feel good about their contribution toward reducing income inequality across the country, another liberal policy goal.

So what’s the real reason Democrats are complaining? They’re pandering to their wealthy campaign contributors by railing against state and local tax deduction limits. The rest of us are tired of supporting their spendthrift habits.

If you’re one of those who will lose some of your state and local tax deduction on your federal return this year, don’t expect any sympathy from me. You can afford it.

Forget the $10,000 limit. Republicans should have eliminated it.

Howard Sierer is an opinion columnist for St. George News. The opinions stated in this article are his own and may not be representative of St. George News.

Email: hsierer@stgeorgeutah.com

Twitter: @STGnews

Copyright St. George News, SaintGeorgeUtah.com LLC, 2018, all rights reserved.

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17 Comments

  • tcrider February 1, 2018 at 8:30 am

    Howwierd,
    you must be smoking the weed in mesquite to write this crap.

    • tcrider February 1, 2018 at 8:35 am

      I meant to write Howweird instead of Howwierd.

  • PogoStik February 1, 2018 at 9:05 am

    Howard, get up to date. It’s no longer about Republicans vs. Democrats. Both parties have lost their way. It’s now about big money vs. the rest of us.

  • dons8120 February 1, 2018 at 10:42 am

    I agree with pogostik, both parties are lost and need to be replaced. The real problem with the tax law is not that we are complaining about lower taxes, it is because the corporate tax breaks are very large and permanent. Our taxes go back up in a few years because somebody has to pay the bills. Why wasn’t our tax rates made permanent? No one is thinking about the future. This tax plan was meant to help to make big business more rich. Giving a few raises and bonuses looks good now, but its a small price to pay for a lifetime of corporate tax breaks that will make the 1% more rich. Everyone on the right is blinded by the more money in your paycheck smoke screen. Enjoy it now because it will disappear and everyone will be whining once again while the rich companies laugh in our face.

  • Death Valley February 1, 2018 at 11:48 am

    A nice propaganda piece, Howard. The temporary tax cuts for us regular folks and the PERMANENT tax cuts for corporations will be the downfall of the Republican party. I suggest you grab your surfboard because there’s a huge set of waves coming in in the Fall. And they’re all BLUE.

  • Craig February 1, 2018 at 1:14 pm

    Surf Board – what you’ve state is simply not true –

    Business taxes were reduced to something reasonable from the highest in the world. Further, most of those are small business owners, people you know. And, and anticipated, companies are expanding, hiring, giving raises and bonuses.

    Are you one of those in states like CA and NY where state tax write offs saved them money. I think that is not capped at $10,000 – a huge lose for the wealthy you seem to think do not deserve their wealth.

    Do you realize that top 1% are 💰 my part of Your and my taxes. Yes, you and I are on welfare. If those you seem to hate disappeared, we would instantly bankrupt.

    You are of the mindset that earning more money deserves punishment not reward and admiration. Carter successfully got tax rates in the 80% range to punish the evil wealthy.

    If the government refuses to support business we are done. It’s not complicated.

    If you get money back on your taxes, you have the option of refusing it since you have determined it wrong.

    If this benefits you in no way or increased your overall tax you are either wealthy or on welfare.

    • bikeandfish February 1, 2018 at 2:51 pm

      I am curious how you justify the permanence of corporate and upper bracket tax cuts while most of the middle class ones expire in five years? Seems rather unjust to me and a strategy to placate many of us while simply kicking the can down the road.

  • Craig February 1, 2018 at 1:15 pm

    Sorry, l must proof when I type on iPhone.

  • bikeandfish February 1, 2018 at 1:38 pm

    One critical element to consider: $100,000 is middle class and actually not all that comfortable in many places, like the blue Metropolitan areas Howard talks about. When you account for Cost of Living many people making $100k can be struggling. I know several people with dual incomes that total in that range and they can barely afford single bedroom apartments even with a child. Entry level homes in those areas often hover between $500-750k.

    Point being, Howard is painting with a broad stroke that ignores alot of nuance. We need pundits who are willing to dive into the details of this new tax law searching for complex truths not more partisan talking points. There are good points to this law but the overall picture I am seeing isn’t as pretty for the middle class in the long run.

    Time will tell.

  • ladybugavenger February 1, 2018 at 2:37 pm

    My employer just announced bonuses for us…..anyone that doesn’t want a bonus you can send it me at ladybugavenger c/o stgeorgenews. 😁

    • bikeandfish February 1, 2018 at 6:06 pm

      Congrats, LBA. An unexpected influx of money is always a good thing.

      Still waiting here in southern utah for employers to catch up inflation from the last five years. Its pretty stagnant here in income. And most, though not all, of the new jobs seem to be service industry. All the while the cost of living continues to creep up.

      • ladybugavenger February 3, 2018 at 9:01 pm

        True story b&f sure hope cost of living doesn’t increase as people get bonuses., but 99% sure rent will go up for renters at a higher increase for a year than a bonus. I don’t have to worry about that but I care cuz I’ve been there. Lower cost of living would mean alot to families.

    • 12345 February 2, 2018 at 3:11 am

      I freely and openly request that all my future bonuses be forwarded to Ladybugavenger and any unused vacation time as well

      • ladybugavenger February 3, 2018 at 8:56 pm

        Thank you, thank youu very much haha!

    • PogoStik February 2, 2018 at 2:53 pm

      I got a bonus once. Two months later they laid me off…

      • ladybugavenger February 3, 2018 at 8:57 pm

        Thanks for the heads up, I’ll be watching out for that. If it happens, unemployment, heres I come! 😁

  • Lee Sanders February 5, 2018 at 11:50 am

    I, for one, will be negatively impacted by the new law. I am on a fixed income, a retiree, and paying alimony. I will lose my alimony deduction, which has been significant. Well, that’s okay, someone’s got to pay for those tax cuts for those struggling corporations.

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