DANIEL VAUGHAN: Biden and Democrats give tax breaks and more to their base

Republicans and Democrats are headed in opposite directions when it comes to who composes each party’s base.

It’s well-known that Republicans are expanding their base by representing more and more working-class voters with each election. Democrats, in turn, are pivoting to their new urban core on the coasts. We’ve witnessed this shift primarily in elections, but now, it’s playing out in legislative policy.

President Joe Biden’s “Build Back Better” bill boosts high-end earners in places like New York, New Jersey, and California. The Wall Street Journal reports that “high-income coastal professionals look likely to emerge as significant winners from the Democrats’ proposed tax agenda.”

Furthermore, the Journal says: “Many residents of New York, New Jersey, California and other states who make more than the $400,000 threshold that President Biden set for tax increases could end up with tax cuts atop the tax cuts they got four years ago.”

In essence, if you’re in a high-tax state, Democrats are leveling the playing field for you with lower-tax red states. By deducting more of those state taxes on their federal returns, a high-income family can live more comfortably in a blue state.

Far be it from me to criticize a fellow American for paying more in taxes. The irony of this tax and spending plan isn’t lost on me, though. For all the bellyaching of the rich needing to pay more in taxes — and the proposed plan from Democrats does increase taxes in some ways — Democrats are now beholden to their new affluent voters. Those wealthy voters don’t want to pay more in taxes.

The primary way Biden and Democrats are claiming they can bring in more tax money without raising taxes is by pouring money into the enforcement arm of the Internal Revenue Service. In the words of the Wall Street Journal, Biden and Democrats want to “double the number of IRS employees over the next decade and require banks, payment services and cryptocurrency exchanges to provide the government more information about account flows.”

The Biden administration is arguing “its IRS spending would generate $480 billion, not $207 billion; in their view, that would tip the bill over to reducing the deficit, and many Democrats appear willing to accept that perspective.” That estimate is how they’re making the case that their legislation is revenue neutral, or at least doesn’t cost as much as everyone says it does.

But think about that for a second. The legislation gives a tax break to those in high-tax blue states while seeking to audit everyone else. At least when old-school liberals argued for a progressive tax code, they applied it to everyone the same way. The Build Back Better plan focuses exclusively on improving the lives of everyday liberals in poorly run states, while forcing everyone to foot the bill.

It’s the essence of legislating like there are two Americas and delivering promises only to your half. Democrats and their media allies are calling this once-in-a-generation legislation, which might be an understatement. It’s one of the first of its kind legislation.

The New Deal, Great Society, Morning in America, and others were all major legislative plans that sought to improve the lives of all Americans. The bailouts from the 2008 recession and the American Recovery plans, for all their issues, focused on improving things across the country. Build Back Better is a payoff to Democratic voters on the coasts, and that’s it.

Everyone else gets to deal with more IRS interference in their lives, and increased regulations and oversight on services like PayPal and Venmo, and the IRS stepping into the wild west of cryptocurrencies.

None of this analysis factors in the big economic issue of our moment: inflation. Maybe Democrats can pass two massive spending bills aimed at infrastructure and all their pet projects on top of the COVID-19 relief bill at the beginning of the year, and maybe all this extra cash sloshing around won’t impact inflation.

But we’re dealing with many “maybes” in that kind of analysis when the White House has been wrong on every inflation prediction since January. Maybe I’ll win the Powerball lottery, too. Or maybe Democrats are dumping more fuel on the burning flames of inflation.

Passing legislation with hopes and prayers that certain things will happen is not the stuff of intelligent governance. That’s doubly true when the global economy is emerging from a worldwide pandemic, supply chains are a mess, and inflation is raging everywhere. Democrats never designed any of their legislative proposals to account for inflation; now, they hope these bills will help the problem.

Opposite directions. The parties aren’t even doing similar things anymore. For a party on the ropes, staring into the abyss of 2022, Democrats are focusing hard on delivering for their regional base, instead of building a platform for all.

Good luck with that.

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