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Wealthy Few Will Benefit From CARES Act Provision, JCT Says

Posted on Apr. 15, 2020

A tax provision in the coronavirus economic relief legislation disproportionately benefits high-income noncorporate taxpayers, according to the Joint Committee on Taxation.

The JCT analysis took a deeper look into the Coronavirus Aid, Relief, and Economic Security (CARES) Act (P.L. 116-136) provision that essentially eliminated the limitation on excess business losses for noncorporate taxpayers for 2018, 2019, and 2020. The JCT found that 81.8 percent of those making $1 million or more would benefit from the provision.

“It’s a scandal for Republicans to loot American taxpayers in the midst of an economic and human tragedy,” Senate Finance Committee member Sheldon Whitehouse, D-R.I., said in an April 14 statement. Whitehouse and House Ways and Means Committee member Lloyd Doggett, D-Texas, asked the JCT to look into the distributional effects of the provision last week.

The two lawmakers also asked for communications between White House and Treasury officials on whether personal benefits of the provision were discussed. “Someone wrongly seized on this health emergency to reward ultrarich beneficiaries, likely including the Trump family, with a tax loophole not available to middle class families,” Doggett said.

The Tax Cuts and Jobs Act prevented noncorporate taxpayers from claiming a deduction for excessive businesses losses beyond $500,000 for joint filers through 2025.

But the CARES Act did away with the limit for passthrough businesses to the disapproval of the two Democrats, who labeled it a loophole for real estate moguls and hedge fund managers and accused Republicans of burying the legislation in the relief measure.

The JCT analysis didn't specify which industries would be hit hardest by the coronavirus crisis, saying it did not assume that business losses would fall disproportionately on specific industries or business entities.

Michael Zona, a spokesperson for Finance Committee Chair Chuck Grassley, R-Iowa, said the accusations “stink of partisan politics” because senators criticizing the measure were part of the negotiations process. “The CARES Act helps businesses keep the lights on and employees on payroll as much as possible to get through this crisis,” Zona said.

The provision was part of several bills that circulated on Capitol Hill, including one that included several revisions by Democrats to remove a fix to the TCJA to restore the limitation on downward attribution of stock ownership. The revised bill also removed a provision delaying estimated tax payments for corporations.

Amy Hanauer, executive director of the Institute on Taxation and Economic Policy, didn't blame a specific party, but criticized the measure for its contribution to creating an unequal society.

“A continued policy focus on the wealthy and corporations will return us to the deeply unequal society that has made so many working families economically vulnerable in the first place,” Hanauer said in a statement.

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