Tax deduction for union dues included in budget plan

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Tax deduction for union dues included in budget plan 

A federal tax deduction for union dues is part of Democrats’ budget plan for fiscal year 2022. 

About the union dues tax deduction

On Sept. 15, the House Ways and Means Committee approved its portion of Democrats’ budget reconciliation package, the Build Back Better Act. Section 138514 of Subtitle I, titled “Allowance of Deduction for Certain Expenses of the Trade or Business of Being an Employee,” says, “The provision allows for up to $250 in dues to a labor organization be claimed as an above-the-line deduction. The provision is effective for taxable years beginning after December 31, 2021.”

Republicans on the Ways and Means Committee opposed the deduction. An amendment sponsored by Rep. Lloyd Smucker (R-Pa.) to strike the deduction was defeated 25-18 along party lines. 

Before 2017, union dues were a work-related expense that could be included in an itemized (“below-the-line”) deduction of expenses exceeding 2% of the employee’s adjusted gross income. Republicans removed most work-related itemized deductions in the 2017 Tax Cuts and Jobs Act (TCJA). 

About the 2022 budget 

Senator Bernie Sanders (I-Vt.) introduced the budget resolution for fiscal year 2022 on Aug. 9. A budget resolution outlines instructions for Congress to use in drafting its spending plan. Passing a budget resolution is a necessary requirement before Congress may use the reconciliation process for a final budget package. The reconciliation process allows the Senate to pass a budget with a simple majority instead of the 60 votes necessary to invoke cloture and override the filibuster

The Senate approved the budget resolution on Aug. 11, and the House of Representatives approved it on Aug. 24. House and Senate committees then had until Sept. 15 to draft their legislation for the reconciliation package.

The deadline for Congress to pass a budget and avoid government shutdown is Sept. 30, as fiscal year 2022 begins on Oct. 1. On Sept. 21, the House voted 220-211 to pass a temporary continuing resolution to fund the government through Dec. 3. The bill went to the Senate on Sept. 22, where it requires 60 votes to pass. 

Democrats have a 220-212 majority in the House. The Senate is split 50-50 with Vice President Kamala Harris (D) having the tie-breaking vote.


Support for union dues deductions 

In April 2021, Sen. Bob Casey (D-Pa.) said of a similar piece of proposed legislation, “Unions are the backbone of the middle class, supporting workers, wage growth and fair economic conditions. In 2017, Republicans eliminated tax deductions for workers and instead gave massive tax cuts for large, profitable corporations. [The Tax Fairness for Workers Act] would put money back in the pockets of working families by reinstating deductions for union dues and other unreimbursed employee expenses.” 

A 2020 Center for American Progress Action Fund brief stated, “This type of [above-the-line] deduction would allow union members to deduct the costs of earning their income and result in the tax code more accurately measuring individuals’ ability to pay.”

Opposition to union dues deductions

Rep. Kevin Brady (R-Texas), ranking member of the Ways and Means Committee, said, “In effect, they’ve forced the 90% of workers in America who aren’t in a union to subsidize the dues of those who are.”

Dominic Pino, a fellow at the National Review Institute, wrote, “By making union dues tax deductible, Democrats are essentially making it more financially viable for people to contribute to organizations that help elect Democrats.”

What we’re reading

The big picture

Number of relevant bills by state

We are currently tracking 99 pieces of legislation dealing with public-sector employee union policy. On the map below, a darker shade of green indicates a greater number of relevant bills. Click here for a complete list of all the bills we’re tracking. 

Number of relevant bills by current legislative status

Number of relevant bills by partisan status of sponsor(s) 

Recent legislative actions

No public-sector union bills saw activity this week.