Democrats’ constant theme for decades—since the last major tax reform in 1986, if not earlier—has been that the rich need to pay more taxes. Along come the Republicans who are proposing limiting or eliminating several tax breaks that benefit higher-income households and the Democrats appear universally opposed.
For example, House Republicans proposed limiting the mortgage interest deduction on home loans of $500,000 or less. The median home sales price in September was $319,700 and the average price was $385,200, according to the U.S. Census Bureau.
So the Republican plan would affect upper-middle and upper-income people, and that’s only if they itemize, which mostly upper-middle and upper-income families do.
In addition, Republicans propose limiting or eliminating state and local tax (SALT) deductions. Those taxes could include property taxes, state income taxes and sales taxes, or some combination. Those current deductions also help mostly upper-middle and upper-income families.
But Democrats, and even some Republicans, oppose both of them.
Why would Republicans be willing to make these changes if that means the rich could pay more taxes?
Republicans are trying to create a simpler and fairer tax code: lower rates with fewer tax breaks. In any tax simplification effort, some will pay more and some less. And Republicans use any revenue add-ons to offset the costs of lowering the rates.
While they are holding firm on the corporate income tax rate changes, they have waffled on lowering the highest marginal rates on individual income taxes, as they initially proposed—another sop to Democrats.
So why are Democrats adamantly defending tax breaks that almost exclusively help the rich? It’s anybody’s guess. But there’s a good chance that the REAL reason is that a complicated tax code allows them to claim to be raising taxes on the rich while providing loopholes so their wealthy Hollywood, Wall Street and Silicon Valley friends never have to pay a dime more.
The best way to get the rich to pay more taxes is to embrace pro-growth economic policies that spur business investment, which is what the Republican plan does. When the economy is growing rapidly, people at all income levels make more money and pay more taxes as a result. That should be the goal of tax reform.