Great piece, Matt. I split my time between conservative Pensacola, FL and conservative, small-town Livingston, TN. As someone who identifies as center-left, thoughtful pieces like this really help me understand the issues and, just as importantly, talk about the issues with my center-right and far right friends and neighbors. I really think many center-right folks are reachable and persuadable and I desperately want Dems in Washington to understand this reality and, as you say, put in the hard work to reach and persuade these folks. Keep up the good work.
Matt attributes Democratic opposition to SALT cap repeal to Democratic lawmakers having been bamboozled by Republicans (as in If Paul Ryan thinks it is good it must be bad).
But isn't a more likely explanation that Democratic lawmakers pushing for SALT cap repeal want to serve their wealthier constituencies who serve to benefit. Roughly one-in-four NJ taxpayers stands to benefit from SALT cap repeal, and Bob Menendez wants to serve tham and not the other 75%. I don't know anything about Josh Gottheimer's district, but I would guess that more than 1 in 4 of his constituents would benefit from repeal.
This is no different than Sinema's reported objection to closing the carried interest loophole - she wants to help her donors, Gottheimer wants to help his.
It drives me crazy that the huge historic achievement of the bipartisan infrastructure bill is all but forgotten about and basically unfamiliar to voters (Dems really know how to make a loss even out of their wins!) and moreover it’s driving me crazy that it’s forecasted that so many billions in one of key parts- the Amtrak money, will go down the drain. Can there be no kind of mobilization of some sort to prevent this and use this once a generation windfall to get America the rail it deserves (or at least get it on track to get there)? It’s super important socially, environmentally, you name it !
I would like the SALT deduction to come back because I would benefit personally, but I understand why this may not be the best idea.
What the Dems should do instead is make the expansion of the Standard Deduction permanent. Right now, most people aren't suffering from the loss of the SALT deduction b/c of this expansion, but it expires in a few years, at which point a lot of the middle class beneficiaries of the old SALT dedudictuon are going to take a hit, and so will plenty of other middle class people.
I assume that the GOP idea is that this will ultimately be made permanent, but as part of a package that makes other tax cuts permanent and/or bargain for additional tax cuts that really are designed to be regressive. If the Dems extend it or make it permanent now, they will be helping the middle class people who would otherwise be hurt by SALT while denying the GOP this bargaining chip.
EDIT: Looks like the SALT cap is also temporary, expiring at the same time as the expanded Standard Deduction. It still may make sense for Dems to try to make both permanent to lock in the current status quo and avoid giving thr GOP the SD increase as a bargaining chip for other tax cuts.
Your views on natural gas / methane make me wonder if you haven't gone too far with your prior that "the groups" are wrong about everything all the time. You can't look just at emissions from burning - methane leakage is a big issue. Even if I buy your (dubious) argument that new methane infrastructure is emissions negative on the margin today, there will come a point soon when it's not.
And we'll then have to eat that investment or wait another thirty years we don't have for that infrastructure to age out. Politically, I'm fine with giving Manchin what he wants to get his vote. But don't piss on your readers and tell them it's raining.
"The argument for this was bog standard conservative tax policy analysis: conservative economists think that marginal tax rates are a really big deal, and the SALT deduction, like all tax deductions, gives people a tax break while doing nothing to lower their marginal tax rate. "
I am confused by the claim that SALT does nothing to lower my marginal tax rate.
Currently, my marginal dollar of income is taxed by both the city/state (~10%) and federal government (~40%), so my marginal tax rate is 10%+40% = ~50%. With SALT, my marginal dollar is still taxed by the city/state (~10%), but only ~90% (=100%-10%) of my marginal dollar is taxed by the federal government (90%*40%), so my marginal tax rate is 10%+90%*40% = 46%, which is less. So it seems like SALT lowers my marginal tax rate by ~4%?
Deficit reduction is very important for long term growth. It means that the Fed can have a more “expansionary” monetary policy given (and it should be given) its inflation target. It does not reduce inflation.
Similarly on reducing drug prices. If done right it will just transfer income from the owners of drug company stocks to consumers with, hopefully, little disincentive to develop new drugs. But that income transfer will NOT reduce inflation.
Now since Republicans have lied about the Biden increases in the deficit and freeze on off shore leasing causing inflation, it is pretty hard to ask Democrats not to lie about deficit reduction drug pricing changes reducing inflation. But for the sake of good policymaking, Progressives need to understand that it is a lie: an untruth, known to be un true and uttered in order to lead hearers to believe that untruth.
I think if SALT-ers really want to reimplement the deduction, what they need to advocate is the opposite of *everything* Paul Ryan put into the TCJA, and not just this piece. That is to say, if they want to raise or eliminate the SALT deduction cap *in exchange for raising the top marginal rate so as to be revenue-neutral or revenue-positive*, then I guess that's ok. I do not really care if some rich people get a tax break, as long as it's on the backs of some other rich people. But yes, repealing the SALT cap alone is nonsense.
In the future I would like to see a more detailed look at the stupidity of ignoring Manchin's July 2021 statement signed by him and Schumer and the weird, quixotic attempt to force Manchin to support a progressive bill with historically high spending numbers. It's really remarkable that in the rush to paint Manchin as this uniquely bad politician, that Schumer and others have avoided criticism.
Also a comment on deficit reduction. Let's be honest that this will have pretty much no effect. First, the deficit reduction is $300 billion over 10 years. That's $30 billion a year which is very little considering annual deficits are well above a trillion dollars and growing. Even assuming we have inflation for the next two years, $60 billion is a drop in the bucket. And this won't actually reduce the budget deficit at all - it will just slightly decrease the growth of the deficit, even under rosy economic assumptions.
Prioritization: I'd like to see Progressives prioritize more equitable growth. Higher incomes for low income people is good and higher incomes for high income people is also good (just not AS good) and it can be taxed. Fighting over a static pie is Trumpism.
I'd like to see a breakdown of the horrible progressive tactics and their justifications for it. What stands out most was the refrain that "Manchin was never going to agree to a bill anyway." Wasn't AOC one of those who said that? That's a pretty huge thing to get wrong, considering you might as well not even try to get this bill done if you believe that.
"bill includes tax credits for buying electric cars but not for buying e-bikes."
In what universe is subsidizing EV a sensible way to reduce CO2 emissions? Will it be popular in even one marginal voter in even one Congressional district? Who ordered that?
Great piece, Matt. I split my time between conservative Pensacola, FL and conservative, small-town Livingston, TN. As someone who identifies as center-left, thoughtful pieces like this really help me understand the issues and, just as importantly, talk about the issues with my center-right and far right friends and neighbors. I really think many center-right folks are reachable and persuadable and I desperately want Dems in Washington to understand this reality and, as you say, put in the hard work to reach and persuade these folks. Keep up the good work.
Matt attributes Democratic opposition to SALT cap repeal to Democratic lawmakers having been bamboozled by Republicans (as in If Paul Ryan thinks it is good it must be bad).
But isn't a more likely explanation that Democratic lawmakers pushing for SALT cap repeal want to serve their wealthier constituencies who serve to benefit. Roughly one-in-four NJ taxpayers stands to benefit from SALT cap repeal, and Bob Menendez wants to serve tham and not the other 75%. I don't know anything about Josh Gottheimer's district, but I would guess that more than 1 in 4 of his constituents would benefit from repeal.
This is no different than Sinema's reported objection to closing the carried interest loophole - she wants to help her donors, Gottheimer wants to help his.
Joe Manchin is really good at politics. I will say that. He is still really popular in WV.
If Sinema scuttles the IRA to save the carried interest loophole, I suspect many, many people are going to become the Joker
I'm puzzled -- has the Manchin bill already passed the Senate? Do we know that Sinema will not scuttle it?
If not, then there seems to be a lot of premature celebration, here and elsewhere.
It drives me crazy that the huge historic achievement of the bipartisan infrastructure bill is all but forgotten about and basically unfamiliar to voters (Dems really know how to make a loss even out of their wins!) and moreover it’s driving me crazy that it’s forecasted that so many billions in one of key parts- the Amtrak money, will go down the drain. Can there be no kind of mobilization of some sort to prevent this and use this once a generation windfall to get America the rail it deserves (or at least get it on track to get there)? It’s super important socially, environmentally, you name it !
I would like the SALT deduction to come back because I would benefit personally, but I understand why this may not be the best idea.
What the Dems should do instead is make the expansion of the Standard Deduction permanent. Right now, most people aren't suffering from the loss of the SALT deduction b/c of this expansion, but it expires in a few years, at which point a lot of the middle class beneficiaries of the old SALT dedudictuon are going to take a hit, and so will plenty of other middle class people.
I assume that the GOP idea is that this will ultimately be made permanent, but as part of a package that makes other tax cuts permanent and/or bargain for additional tax cuts that really are designed to be regressive. If the Dems extend it or make it permanent now, they will be helping the middle class people who would otherwise be hurt by SALT while denying the GOP this bargaining chip.
EDIT: Looks like the SALT cap is also temporary, expiring at the same time as the expanded Standard Deduction. It still may make sense for Dems to try to make both permanent to lock in the current status quo and avoid giving thr GOP the SD increase as a bargaining chip for other tax cuts.
Your views on natural gas / methane make me wonder if you haven't gone too far with your prior that "the groups" are wrong about everything all the time. You can't look just at emissions from burning - methane leakage is a big issue. Even if I buy your (dubious) argument that new methane infrastructure is emissions negative on the margin today, there will come a point soon when it's not.
And we'll then have to eat that investment or wait another thirty years we don't have for that infrastructure to age out. Politically, I'm fine with giving Manchin what he wants to get his vote. But don't piss on your readers and tell them it's raining.
"The argument for this was bog standard conservative tax policy analysis: conservative economists think that marginal tax rates are a really big deal, and the SALT deduction, like all tax deductions, gives people a tax break while doing nothing to lower their marginal tax rate. "
I am confused by the claim that SALT does nothing to lower my marginal tax rate.
Currently, my marginal dollar of income is taxed by both the city/state (~10%) and federal government (~40%), so my marginal tax rate is 10%+40% = ~50%. With SALT, my marginal dollar is still taxed by the city/state (~10%), but only ~90% (=100%-10%) of my marginal dollar is taxed by the federal government (90%*40%), so my marginal tax rate is 10%+90%*40% = 46%, which is less. So it seems like SALT lowers my marginal tax rate by ~4%?
Deficit reduction is very important for long term growth. It means that the Fed can have a more “expansionary” monetary policy given (and it should be given) its inflation target. It does not reduce inflation.
Similarly on reducing drug prices. If done right it will just transfer income from the owners of drug company stocks to consumers with, hopefully, little disincentive to develop new drugs. But that income transfer will NOT reduce inflation.
Now since Republicans have lied about the Biden increases in the deficit and freeze on off shore leasing causing inflation, it is pretty hard to ask Democrats not to lie about deficit reduction drug pricing changes reducing inflation. But for the sake of good policymaking, Progressives need to understand that it is a lie: an untruth, known to be un true and uttered in order to lead hearers to believe that untruth.
I think if SALT-ers really want to reimplement the deduction, what they need to advocate is the opposite of *everything* Paul Ryan put into the TCJA, and not just this piece. That is to say, if they want to raise or eliminate the SALT deduction cap *in exchange for raising the top marginal rate so as to be revenue-neutral or revenue-positive*, then I guess that's ok. I do not really care if some rich people get a tax break, as long as it's on the backs of some other rich people. But yes, repealing the SALT cap alone is nonsense.
I feel like we hear a lot less about automatic stabilizers than we did a couple years ago.
I think this is a great article.
In the future I would like to see a more detailed look at the stupidity of ignoring Manchin's July 2021 statement signed by him and Schumer and the weird, quixotic attempt to force Manchin to support a progressive bill with historically high spending numbers. It's really remarkable that in the rush to paint Manchin as this uniquely bad politician, that Schumer and others have avoided criticism.
Also a comment on deficit reduction. Let's be honest that this will have pretty much no effect. First, the deficit reduction is $300 billion over 10 years. That's $30 billion a year which is very little considering annual deficits are well above a trillion dollars and growing. Even assuming we have inflation for the next two years, $60 billion is a drop in the bucket. And this won't actually reduce the budget deficit at all - it will just slightly decrease the growth of the deficit, even under rosy economic assumptions.
Prioritization: I'd like to see Progressives prioritize more equitable growth. Higher incomes for low income people is good and higher incomes for high income people is also good (just not AS good) and it can be taxed. Fighting over a static pie is Trumpism.
I'd like to see a breakdown of the horrible progressive tactics and their justifications for it. What stands out most was the refrain that "Manchin was never going to agree to a bill anyway." Wasn't AOC one of those who said that? That's a pretty huge thing to get wrong, considering you might as well not even try to get this bill done if you believe that.
"bill includes tax credits for buying electric cars but not for buying e-bikes."
In what universe is subsidizing EV a sensible way to reduce CO2 emissions? Will it be popular in even one marginal voter in even one Congressional district? Who ordered that?