While Democrats’ $3.5 trillion reconciliation package contains major tax hikes and spending increases, it also contains numerous provisions of dubious origin. These provisions reveal Democrats’ priorities: carving out giveaways to the Left’s base by spending on “woke,” wasteful initiatives.
Below are just 10 of these perplexing items.
1. Fake News Tax Handout for Reporters at “Local” Newspapers with up to 750 Employees
The proposal creates a tax credit for “local newspapers” with up to 750 employees – a largely left-of-center group of workers.
It gives an employment tax credit of up to $12,500 per person for reporters at “eligible” newspapers. As a section-by-section analysis from the Ways and Means Committee details:
“The credit amount is equal to 50% of wages for each of the first 4 calendar quarters, and 30% of wages for each calendar quarter thereafter. Eligible local newspaper publisher is any employer that is in the trade or business of publishing a local newspaper that serves the needs of a regional or local community and who employs no more than 750 employees.”
This payroll credit would cost $1.3 billion. The vast majority of newspapers in the country have fewer than 750 employees. Likely beneficiaries include The Malibu Times, Aspen Times and the Vineyard Gazette serving the progressive playground of Martha’s Vineyard.
2. Big Labor Tax Break
Sec. 138514 provides for an above-the-line deduction for up to $250 in “dues” to a labor organization. This deduction 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 It is a more harmful and favorable version of the union dues deduction that existed before the GOP tax cuts repealed it.
The tax deduction the TCJA repealed allowed employees to deduct any unreimbursed expenses (including union dues) that exceeded 2 percent of their adjusted gross income. However, this distortionary deduction was repealed as part of a trade-off that resulted in lower taxes for the middle class across the board. Now, the Left is artificially trying to buttress union membership and fill their political war chests, as union political giving almost entirely flows to Democrats.
This deduction would cost $4.25 billion in revenues.
3. Solar Subsidies to “Promote Environmental Justice”
In yet another edition of, “Why is the government paying for this?”—This provision in the bill expands the energy credit for solar facilities in low-income communities, in which “the Secretary makes an allocation of environmental justice solar capacity limitation.”
In determining which solar facilities to choose, the Secretary is directed to consider the greatest health and economic benefits, wage and employment benefits, and “community engagement” the facility conducts. Projects would receive an additional 10 percent credit if the solar facilities are in low-income communities, or an additional 20 percent credit if a project is “a qualifying low-income residential building project or a low-income economic benefit project.”
The extension, modification, and increase in this energy credit would cost $63.9 billion.
4. $15 Billion for “Energy-Efficient” Doors and Windows
The reconciliation package would replace a $500 lifetime cap on nonbusiness energy property credits with an annual $1,200 credit. This credit allows up to $600 in credits for energy efficient windows and skylights and up to $500 for energy efficient doors.
This provision also increases the percentage of the credit for installing qualified energy efficiency improvements from 10 percent of the cost to 30 percent. There is no reason the government should be subsidizing individuals’ door and window replacements.
5. Tax Credit for Electric Bikes
Sec. 136407 establishes a 15 percent refundable tax credit for electric bicycles. Under this law, taxpayers could claim a credit of up to $1,500 for electric bicycles costing as much as $8,000 per bike. As a reminder, a tax credit is a dollar-for-dollar reduction in your tax liability.
The Joint Committee on Taxation estimates that this provision alone could cost $7.43 billion.
In 2020, the e-bike market was valued at $23.89 billion. This single provision in the Democrats’ plan spends one-third of the entire value of the e-bike market.
6. Tax Breaks for Elite, Well-Funded Private Universities
Sec. 137702 of this bill would reduce, potentially down to zero, excise tax on investment income of private colleges and universities depending on the amount of financial aid they offer their students. Notably, universities who can provide a lot of grants and scholarships are typically universities with the largest endowments: for example, universities like Harvard and Yale.
The amount of tax imposed would be reduced based on the aggregate amount of qualified aid awards provided by the institution in relation to the aggregate undergraduate tuition and fees received by the institution. This phaseout would reduce tax revenues by $2.34 billion.
7. Investments in the “Green Workforce”
In Title 5 of this bill, “Investment in the Green Workforce,” Democrats spend $10 billion funding perplexing, niche credits:
- Sec. 136501 allows the Secretary to allocate an additional $2.5 billion in credits for the advanced energy project credit. About $400 million in credits each year would be reserved for projects in “automotive communities.” Automotive communities, in this bill, are defined as communities that have “experienced major job losses in the automotive manufacturing sector.” This is an apparent handout for unionized autoworkers.
- Sec. 136502 provides a credit for up to 10 percent of the labor costs incurred by a taxpayer in installing “mechanical insulation property into a mechanical system which was originally placed in service not less than 1 year before the date on which such mechanical insulation property is installed.” Huh?
8. Refundable Credit for “Environmental Justice” Programs
Democrats provide a substantial refundable credit for “environmental justice programs” under Sec. 136601 of the bill.
This provision creates a capped refundable competitive credit of $1 billion for each year from 2022 through and including 2031 to institutions of higher education for environmental justice (EJ) programs. The base credit is 20 percent of costs spent within five years by the higher education institution; however, for HBCUs and minority-serving institutions (MSIs), this credit could cover 30 percent of costs.
9. Repealing Social Security Number Requirement to Qualify for Child Tax Credit (CTC)
Sec. 137102 would eliminate the Social Security Number requirement for qualifying children, which was added by the GOP tax cuts, opening the credit up to more abuse.
10. Credit for Contributions to a Public Universities’ Research Infrastructure Projects
Middle-class Americans aren’t the usual donors to colleges and universities. Especially not when it comes to project-specific donations. Nonetheless, Democrats are creating a credit for contributions to public universities’ research infrastructure projects.
The “public university research infrastructure credit” is an amount equal to 40 percent of the qualified cash contributions made by a taxpayer during such taxable year for a qualifying project. The credit amounts allocated to a certified educational institution for all projects cannot exceed $50,000,000 per year, and the total amount of qualifying project credit amounts that may be allocated can be up to $500,000,000 for each 2022 through 2026 – or $2.5 billion in total.