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Richard Rider

Tax law change makes paying union dues more painful. Good!

Most public employee labor union dues are used to elect politicians or to pass (or oppose) propositions.  The actual percentage of these dues spent on politics is unknown, as the unions report whatever they want, and there’s no independent audit.  There is no oversight of this reporting process by the IRS, FTB, or any other government agency.

The unions generally claim that about 25%-30% of union dues are spent on politics and politicians.  In the rare instance where a court looks in detail at labor union political spending, the figure the court comes up with is usually a more realistic (but in my estimation still understated) 60% to 70%.

Up until the Trump tax reform, one ridiculous subsidy for the labor unions was to allow such dues to be deducted by individual union members on their federal and state income tax filings.  It was allowed as a “miscellaneous deduction,” which combined with other miscellaneous write-offs had to exceed 2% of adjusted gross income (AGI). to be used as a deduction.

In essence, this allowed many union members to deduct certain insurance payments buried in the dues.  More important, members could deduct all the union’s political spending included in their dues.  This subsidy allowed (or forced) many union member to make tax deductible political contributions — something the rest of us could not do.  It was yet another financial gift (a little-recognized gift) for the Democratic Party.

The good news is that the Trump tax reform eliminated this deduction, ending a longstanding union subsidy.  This change will make paying union dues a more painful outlay for union members, as it should be.

As a result, if the pending U.S. Supreme Court “Janus” case makes such labor union dues optional, it’s likely that a even larger percent of current mandatory public employee union members will opt to not pay such dues.  And that would be a huge win for taxpayers.