"The Rich" Figure Out That The Tax Bill Is Not A Big Giveaway To Them

The famous Central Newsroom of Progressive Groupthink, located beneath Times Square, has been hard at work the past few months coming up with the official party line and talking point to deal with the tax bill making its way through the Republican-controlled Congress.  And, if you have been even close to awake during this time, you know what the officially-issued line and talking point is: This is a "massive giveaway to the rich."

You know that that is the officially-issued line and talking point because you can find it in literally every progressive or mainstream source that discusses the subject.  Examples:

  • Washington Post, October 3: "The Trump tax cuts would be the most insane giveaway to the rich ever."  Yes, minor variations from the official talking points are allowed, such as the substitution of "insane giveaway to the rich" for "massive giveaway to the rich."
  • Huffington Post, December 2:  "Senate Passes Massive Tax Cuts For The Rich In Middle Of The Night."
  • New York Times, November 27:  "Senators Scramble to Advance Tax Bill That Increasingly Rewards Wealthy."
  • The Hill, November 29:  "The current Republican tax bill would mostly benefit billionaires and millionaires like Trump, as well as wealthy corporations, all on the backs of middle-class and working-class Americans."     

But the question is, has anyone done any real analysis here?  Or is this just a line that sounds good to stoke up some resentment among the ignorant and thus help the progressives gain and hold onto political power?

It sure looks like the latter to me.  Consider the world of high-earning professionals from which I come.  These people are the archetypes of "the rich" in the usual caricature.  Suppose you are such a professional in Manhattan in the seriously "rich" category, earning $2 million per year.  You are currently paying around $700,000 per year in federal income tax.  Under the Senate bill, your marginal tax rate will go down from 39.6% to 38.5%.  Under the house bill, your marginal tax rate does not go down at all.  The marginal rate change will thus save you either about $20,000 per year, or nothing, depending on which version prevails.  You are currently paying in excess of $200,000 per year in New York State and City income tax.  Loss of that deduction will cost you about $80,000 per year.  If you own a house or apartment, it won't be a cheap one, and you likely pay around $50,000 or more in property tax.  Loss of that deduction (above a $10,000 cap) will cost you around another $15,000 or more per year.  Net, this is going to cost you $100,000 or more per year on your income tax bill.  The value of your home could also suffer some serious negative impact from the loss of the interest and income and property tax deductions.  

How again is this a "giveaway to the rich"?

I acknowledge that there are many other moving pieces in these tax bills, and there are certainly a good number of affluent people who will benefit, particularly in the category of business owners.  But people who just earn high amounts of ordinary income -- which includes not just professionals, but also most corporate executives -- look to be almost entirely big losers.  There could be a handful of such who live in no-income-tax states and rent their homes who could show a small gain.

So over at the New York Times, after parroting the official talking point for several weeks, they suddenly decided yesterday to take a look at how the House and Senate bills would affect the affluent people living in their own locality, and now they discover that it's the opposite of what they have been saying.  The headline is "How New Yorkers Would Lose Under the Republican Tax Bill."  By the way, it's not just any New Yorkers who would lose; it's predominantly the high income New Yorkers.

The article leads off with this picture of a row of townhouses on the Upper West Side of Manhattan:

Upper West Side townhouses.jpg

Their caption is "Brownstones on the Upper West Side of Manhattan. New York’s homeowners could suffer disproportionately from changes in deductions for state and local taxes."  Does it bring a tear to your eye?  For those unfamiliar with our Manhattan real estate market, the houses pictured have market values in the range of $5 - 10 million (and in some cases even more), depending on condition and whether they are burdened with rent-regulated tenants.  You really have to feel for their owners' "suffering."

So what is the real impact here?

The tax plan would probably cut taxes for most New Yorkers, at least in the short term. But it has several provisions that local leaders said could pose long-term problems for New York and other urban areas. Mayor Bill de Blasio, in an interview on Monday, estimated that 700,000 New Yorkers would pay more in taxes in the near term.

De Blasio doesn't say who those 700,000 are, but the obvious inference is that they are the higher-income part of the population, who are losing the deductions for state and local income and property taxes and mortgage interest.  Could this be a backhanded acknowledgement that the lower and middle income mostly gain and the upper income mostly lose?  

And wait!  I thought that higher taxes on "the rich" were a good thing!  Actually, we now find out that higher taxes on "the rich" are only a good thing if we get the money, and they are a terrible thing if you get the money:

“The human impact is huge,” Mr. de Blasio said, referring both to the higher taxes some residents would pay and to the services that could be cut as a result of the tax plan. He said his administration had tried for four years to make one of the world’s most expensive cities more affordable by providing public prekindergarten and paid sick leave. “And then along comes the federal government and makes the situation worse,” he said.

All I can say is, it's time for the people in the Central Newsroom beneath Times Square to work some overtime to come up with the new official party line and talking points.