Democrats Might Create A Tax Break For Union Membership In Budget Bill

Unions are urging Congress to pass the Protecting the Right to Organize Act, or PRO Act, which would make significant changes to labor law in order to encourage more unionization.

Democrats are considering a tax break for union members as part of their new $3.5 trillion budget plan. Labor organizations are urging lawmakers to include a provision allowing workers to deduct the cost of union dues from their taxable income.

A tax break of this kind could reduce the cost of union membership and, in theory, encourage more workers to join unions. According to a Democratic aide, senators are considering the idea.

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According to a union source who spoke on the condition of anonymity, organized labor has urged Democrats to make the tax break an “above the line” deduction with the IRS. That is, workers would be able to benefit from it regardless of whether they itemize or take the standard deduction.

Legislators are also considering establishing a tax credit for union dues, which, unlike a deduction, would reduce a filer’s tax liability dollar for dollar. Bloomberg Law was the first to report on discussions about a tax break for union dues.

This week, Senate Democrats passed an initial budget outline that would allow them to pass a final bill later this year using the special “budget reconciliation” process, which requires only a simple majority vote to break a filibuster rather than the usual 60.

Democrats see the bill as their last chance to make major changes in years, and they are considering a wide range of policies. They’ve only provided a broad outline of the bill’s major components, such as “pro-worker incentives and worker support.”

If such a break were to become a reality, it would be an improvement on a tax break that union members enjoyed until Republicans repealed it in 2017.

Workers used to be able to deduct union dues if they had enough other eligible deductions to justify filing a “itemized” tax return, and even then, the eligible expenses had to total more than 2% of the tax filer’s adjusted gross income.

Republicans repealed the deduction for union dues when they eliminated an entire category of miscellaneous deductions. It was one of several changes made by Republicans to simplify the individual tax code as part of the Tax Cuts and Jobs Act, which reduced corporate taxes.

The most significant individual simplification was a much larger “standard deduction,” which resulted in far fewer households filing itemized returns.

That is one of the reasons Democrats are considering union dues as a “above the line” deduction, which allows taxpayers to deduct certain items, such as up to $250 for teachers’ classroom expenses, above the line on tax form 1040 where filers report their adjusted gross income.

According to Alexandra Thornton, senior director of tax policy at the left-leaning Center for American Progress, an above-the-line deduction for union dues would increase tax parity between workers and businesses.

Employers, she pointed out, can already deduct the costs of bargaining with and even resisting unions because it is considered a cost of doing business.

If the same logic were applied to employees, union dues would be deducted from their earnings for tax purposes.

“When you think about the union and what it does for workers, they’re basically negotiating salary and benefits. So it’s a cost of getting your income if you’re a worker,” said Thornton, who outlined a proposal for the above-the-line deduction in a 2019 paper.

She called making union dues tax-deductible “a fairness thing.” According to Thornton, the deduction would be a small way to encourage union membership through tax policy. Union density in the United States has been declining for decades, with only 10.8 percent of workers now members of a union.

That is roughly half of the rate in 1983 when the government began tracking. (The Writers Guild of America-East represents the majority of HuffPost employees.)

Dues vary from one union to the next, but they typically range between 1% and 2% of a worker’s gross wages. Of course, how much a worker saved through an above-the-line tax break would depend on how much they paid in dues and which tax bracket they fell into.

For a worker earning $60,000, the savings could amount to a couple of hundred dollars per year, lowering the effective cost of union representation.

Unions are urging Congress to pass the Protecting the Right to Organize Act, or PRO Act, which would make significant changes to labor law in order to encourage more unionization.

Because the legislation lacks the votes needed to overcome a Senate filibuster, Democrats are considering implementing parts of it through budget reconciliation, particularly a provision that would impose monetary fines on employers who violate labor laws.

Sen. Bernie Sanders (I-VT), chairman of the Senate Budget Committee and primary author of the budget bill, is one of the most vocal supporters of the PRO Act.

The proposal for a union dues tax deduction is not included in the PRO Act, but some lawmakers have pursued it separately. Earlier this year, Senators Sherrod Brown (D-Ohio), Bob Casey (D-Pa.), Patty Murray (D-Wash.), and Chuck Schumer (D-NY) introduced a standalone version of the union dues deduction.

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