Democrats are pushing to include a tax break for big labor in President Biden’s $3.5 trillion tax-and-spend plan in order to fill Democrats’ political war chests.
Big Labor is lobbying lawmakers to include this tax break so that union members can deduct the cost of dues from their taxable income. This tax break would be “above the line,” meaning that taxpayers could take this deduction regardless of whether they itemized their deductions.
Even more concerning, lawmakers are considering implementing a tax credit for union dues rather than a deduction, which would provide a greater tax benefit by reducing the filer’s tax liability dollar for dollar. These changes would effectively subsidize unions at the expense of other taxpayers.
This deduction (or credit) would be distortionary tax policy that does little or nothing to help the majority of middle class families. It is a more harmful and favorable version of the union dues deduction that existed before the GOP tax cuts repealed it.
The tax deduction the TCJA repealed allowed employees to deduct any unreimbursed expenses (including union dues) that exceeded 2 percent of their adjusted gross income. However, this distortionary deduction was repealed as part of a trade-off that resulted in lower taxes for the middle class across the board.
Democrats plan to fund this package through tax hikes on the American people. While they struggle to find pay-fors, as they are well into economy-damaging territory, it appears they are still willing to lose tax revenue for their union donors.
The fact is, many workers do not want to join a union voluntarily. Union membership is in decline — today, a mere 10.8 percent of workers are unionized, down from 34.8 percent in 1954. Only 6.3 percent of private sector workers are unionized. Because of this trend, big labor wants a special tax break that they hope will make union membership more attractive to workers.
While Democrats claim the use of dues for political lobbying are excluded from deductibility, unions regularly blur the lines of how dues are actually being used. Regardless, more money going to one project frees up money for another. Unions are giants in the political arena – an overwhelming amount of their political contributions go to left-leaning and/or Democratic groups.
For example, the National Treasury Employees Union (NTEU) represents 150,000 federal employees. This union shovels 97 percent of its PAC money into Democrat campaign coffers. In the 2019-2020 campaign cycle, NTEU’s political action committee raised $838,288. Out of $609,000 in spending on federal candidates, an overwhelming 97.04 percent went to Democrats.
Beneficiaries of this political giving include House Speaker Nancy Pelosi (D-Calif.), Rep. Pramila Jayapal (D-Wash.), Rep. Maxine Waters (D-Calif.), Rep. Sheila Jackson-Lee (D-Texas), Sen. Dick Durbin (D-Ill.), and Sens. Jon Ossoff and Raphael Warnock (D-Ga.).
The last thing the federal government should do is providing tax breaks for union membership. If individual Americans wish to join a union, they can do so. Certainly, taxpayers and U.S. businesses should not be made to pay more in taxes for these kinds of special interest inclusions in the $3.5 trillion spending package.
This isn’t the only case where Democrats have attempted to use changes in tax policy to benefit their special interests. Ever since the TCJA repealed the state and local tax (SALT) deduction, Democrats have been trying desperately to reinstate it. Earlier this month, every Senate Democrat reaffirmed their support for the SALT deduction in an amendment vote. Nearly 96 percent of the benefits of SALT cap repeal would go to the top quintile of earners. Despite this policy contradicting virtually everything Democrats claim to stand for, it does benefit wealthy Americans in blue states, which happen to make up many of their donors and special interests.
Democrats are pushing a reckless proposal that would include trillions of dollars in tax hikes primarily borne by workers and consumers through lower wages, fewer jobs, and higher prices. As it stands, this legislation is bad enough. However, including a tax credit or deduction of big labor would make this legislation even worse and should be rejected.