Posted on by Californiacontrarian

Democrats vs. The Poor

As I am writing this, Treasury Secretary Steven Mnuchin has just put forth President Trump’s first edition of his new tax plan. In response I have seen a snapshot of Chuck Schumer standing at a podium with his mouth open (as usual), and his arms outstretched like the Christ the Redeemer statue in Rio de Janeiro, but I have not yet heard the caterwauling from the usual cast of Democratic characters. ( I now really like the word, “caterwauling” because I can now spell it and it oftentimes perfectly describes the Democratic whining.)

Here in California I think that I can predict the lyrics of the song that the California “Queens-ton Trio” (Pelosi, Feinstein, & Waters) will sing:

“This new plan will make the rich richer. ”

The middle class will be the losers.”

“This plan will make the poor poorer!”

However, when one looks at the itemized deductions that will disappear it seems pretty apparent that the higher earners will be the big losers. They obviously pay more state income tax because they earn more, and this deduction . . . abracadabra . . . gone. The more affluent also pay higher property taxes since they own more expensive houses. The previously deductible property tax deduction . . . abracadabra . . . gone.

The portion of middle class that does not itemize will benefit, because, in essence, if they do not itemize, it means that they do not have any significant deductions, and thus they have little in the way of deductions to lose. That portion of the middle class that itemizes could potentially be losers as they will lose their property tax deduction and their state income tax deduction. However in some instances this potential loss may be balanced out by the end of the alternate minimum tax.

On the other hand, the poor that pay taxes will be the most significant benefactors in this new plan. The standard deduction for families and for individuals will be doubled and this obviously benefits those who do not itemize and thus encompasses most of the poor.

Now here is the hooker for the Democrats. As only about 30% of households use itemized deductions, the present benefit from these deductions are concentrated in the high income-high taxed states. The states that will potentially be the biggest losers are those states with the highest state income taxes, such as New York, New Jersey, and of course California.

These are all Democratic states.

So the Democrats have a choice to make. Will they go along with a plan that will benefit the poor and middle class the most, or will they revert to partisan politics in order to benefit their “nanny states”?  If past actions are any indicator, I would bet that the Democrats will come out in force against this plan, as they always seem to choose the option that hurts the poor!

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