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The Mad Hatter Squad Confronts PPP Forgiveness

Posted on Nov. 30, 2020

To the Editor:

The Dormouse arose from his slumber, shouting, “Tax the rich, tax the rich, tax the rich.”

“Tell ‘em about the Ferrari,” said the Mad Hatter. “Tell The Squad,” he said, raising his voice appreciably. “Dare tell,” chimed in the March Hare.

“What Ferrari?” Alice asked. The Mad Hatter calmly responded, “The new Ferrari the business owner is going to buy to mostly store in the garage at the third home with the tax reduction benefit and loss carryback he’ll get when he gets a tax deduction for the funds we gave to him to pay his employees and his expenses.” The Dormouse arose from his slumber, shouting, “Free money, free money, free money,” and dozed off again.

“Please explain,” replied Alice. The Hatter continued, “The government loaned money to business owner employers — first and primarily to pay employees to basically stay home because of the coronavirus rather than lay them off or terminate them. Then the use of the monies was expanded to allow them to cover certain operating expenses. If the funds were properly used for these purposes, then the government said forget about it, keep the money. The business owners don’t have to pay it back, but now they, their highly paid lobbyists and the trade associations that serve them — sometimes known as professional organizations — are demanding the business owners be allowed a tax deduction for the expenditure of the government’s money. This will allow them to reduce their taxes for this year or even prior years — all attributable to the government’s expenditure not their own funds.”

“Oh Congress would never do that,” said Alice in admonishing fashion. “No so fast,” interjected the March Hare, “Sens. Wyden and Grassley — in bipartisan fashion, no less — insist we should do this — telling us that’s what Congress meant to do in the legislation it wrote for the program which has the acronym PPP for Payroll Protection Program.”

Alice thought for a second. “Why should a business owner be able to obtain tax reductions and refunds of prior years’ taxes for spending someone else’s money, let alone the government’s?” The March Hare responded, “Precisely.” The Hatter added, informatively, “If it were anyone else’s money, the forgiveness would be income and merely offset the monies paid out — no harm, no foul. But, instead, the government is allowing them to use our money, or that of our children or grandchildren, to create their own tax reduction.”

“Well, surely Congress had applied some strings to what they can do with the money they save from tax deductions attributable to the government’s — that is, mine and my children’s, and my grandchildren’s — money.”

“NONE whatsoever, my dear girl!” shouted the March Hare. Dormouse opened one eye and added, “Free money, free money, free money for the rich.” “They’re not all rich,” said Alice, and the Mad Hatter replied, “Did you mean they’re not rich at all, which is it?” “Makes no difference,” said the March Hare, continuing, “They’re business owners. Most really small businesses paid themselves in some cases or in others had the opportunity to receive their own government payments.”

“Here’s the issue,” chortled the Hatter, “would the Congress of March 2020 have provided direct, no-strings-attached tax benefits to business owners across this country if that had been on the table? Would The Squad, Speaker Pelosi, Sens. Schumer, Warren, and Sanders have endorsed such a program, or would they have characterized it as a big giveaway to the wealthy? As significant tax benefits for business owners for spending government monies to assist their employee and landlords? Conceptually, the program was simply designed to utilize businesses to assist in the large welfare transfer program that would — and did, anyway — overwhelm the government’s ability to provide. Now with the assistance of their lobbyists, the professional organizations that they pay staggering amounts to the members of, and their campaign contribution recipients in Congress, they’re attempting to gain unrestricted tax benefits through the back door.”

Dormouse yawned a very big yawn. “What’s new?”

“But surely, the progressives in the House, at least, not knowing about the 2021 Senate makeup, will resist an unrestricted giveaway that would never have been approved by them as a direct expenditure program?” Alice inquired.

“Not so fast, young lady. Think about it. Politics drive policy in this world and probably any other for that matter,” chortled the Mad Hatter.

Alice thought pensively, thinking about sausage, “Oh dear. This is politics isn’t it? They’ll probably just go ahead and allow this and trade it for bailouts of the states and the cancellation of today’s student debt. My poor children and grandchildren — if they don’t grab all those ‘free’ benefits, all they’ll get to do is pay for someone else’s free stuff.”

Dormouse yawned even bigger. “Not to be confused with policy, that’s how progressive tax politics works.” The Mad Hatter added, “And that’s how business politics invites it.”

Alice just sighed.

Kip Dellinger
Senior Tax Partner
Cooper, Moss, Resnick, Klein & Co. LLP
Nov. 23, 2020

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