Entitlements for the Affluent

The Sanders-Biden bill is full of subsidies for the upper middle-class.

WSJ editorial. 

"President Biden is trying to rescue his $3.5 trillion tax and spend plan by playing the class card, claiming it will help “working people” who are “struggling” to pay the bills. This makes it sound like a safety net program for the poor rather than what it really is: a government subsidy engine for everyone including the affluent.

That’s one of the political secrets Democrats would rather not talk about, though it is central to their political project of hooking even the upper middle-class on government. Here are among the many alms for the affluent in the Bernie Sanders-Joe Biden- Nancy Pelosi bill.

***

• The expanded child tax credit has become a monthly government check that transfers large sums of money from childless taxpayers to financially secure middle-class families. The allowance is now $3,600 per child under age 6, and $3,000 for ages 6 through 17. A married couple making $150,000 a year with four children (two under the age of 6, two above) would qualify for $13,200 a year. 

While the credits phase out with income, the same family earning $400,000 could still get up to $8,000 a year (an income level passed by Republicans in 2017). Mr. Biden recently said families earning more than $400,000 should pay more in taxes, since “that’s a lot of money.” He wants to tax them more and then get political credit for the handouts.

• A new entitlement caps child-care costs at 7% of income and was initially limited to parents making up to 200% of their state’s median income. But progressives eliminated the cap in committee so it would cover wealthier voters. The entitlement is now universal.

The U.S. median income for a family of four is about $90,000. Those families would pay 2% of income annually ($1,800) for child care. Taxpayers would pay the rest, roughly $21,000 for two kids in day care, according to estimates by Rachel Greszler of the Heritage Foundation. In wealthy states like Massachusetts, where child-care prices are higher, a family of four earning $200,000 a year could receive $23,000. Even at $367,000 in income, that Bay State family could get $10,000 in subsidies (as long as they self-certify they have less than $1 million in assets).

• Democrats also want paid family leave—about two-thirds of average wages for up to 12 weeks a year for any family care. It would apply to both full- and part-time employees, and in the case of newborns both parents would be entitled to leave. This means a married couple with a newborn—each earning $200,000 (Mr. Biden’s definition of a “rich” household)—could each collect more than $1,000 in weekly benefits, resulting in $24,000 of paid leave in one year. A couple making $100,000 each would be eligible for roughly the same amount.

• Democrats are also expanding ObamaCare. This spring’s Covid bill eliminated the income cap (400% of the poverty level) on who qualifies for subsidies. Brian Blase of the Galen Institute has calculated this windfall for higher-income earners. It’s especially large for older Americans or those living in parts of the country where the benchmark premium (used to calculate benefits) is higher than the national average.

A family of five with a 60-year-old head of household in Prescott, Ariz., for instance, could earn $350,000 a year and still qualify for an ObamaCare subsidy of $21,309. Even at $500,000 of income, that family would still get $8,559 in federal healthcare dollars.

• The bill includes a huge, new $12,500 electric vehicle tax credit. Since EVs cost between $10,000 and $15,000 more than similar gas-powered vehicles, this money will mostly flow to well-off coastal dwellers, especially in California. A couple can make $800,000 a year and still qualify for some of the credit.

• The biggest subsidy of all may be the return of the state and local tax deduction. Speaker Nancy Pelosi has promised her Members “meaningful” relief above the current $10,000 cap. Only some 15% of taxpayers itemize their deductions, and most of those who would benefit from a higher cap are the affluent—again mostly in richer coastal states.

Democrats want to subsidize the upper middle-class this way because they know that the broader the benefits are, the politically safer a program is. That’s the way it works politically in Europe, with one big caveat: The middle class who get the benefits also pay higher taxes. Democrats will send that bill to the middle class when the cost of their entitlements for the affluent is too entrenched to repeal."