As millions of Americans woke up to $1,200 checks in their bank accounts, some of the nation’s richest taxpayers learned they were about to receive a bit of relief as well — about $1.7m each, to be exact.
Nearly 43,000 millionaires across the country would soon profit off a loophole adapted from the Republican tax code overhaul of 2017, which allows certain business owners to significantly reduce their tax liability by temporarily suspending the limit of deductions they can place against non-business income.
The loophole was included as a provision in the sweeping $2.2tn Coronavirus Aid, Relief and Economic Security (CARES) Act, according to a report published by the Joint Commission on Taxation. Democrats who ordered the report have since accused Republicans of having “wrongly seized on this health emergency to reward ultrarich beneficiaries, likely including the Trump family”, and called for the tax break to be immediately repealed.
The Joint Commission on Taxation said that a staggering “82 per cent of the benefits of the policy go to about 43,000 taxpayers who earn more than $1m annually”. Those 43,000 taxpayers eligible for the loophole would receive an average windfall of nearly $1.7m — a figure confirmed by the commission’s calculations and first reported by Forbes.
Meanwhile, some of those wealthy Americans earning more than $1m annually may receive far greater than $1.7 million, as the provision can be retroactively placed “so losses in 2018 and 2019 can be ‘carried back’ against the past five years”, according to the policy.
Rep. Lloyd Doggett (D-TX), who commissioned the report along with Senator Sheldon Whitehouse (D-RI), slammed his Republican colleagues over the tax break in a statement alleging the loophole was “so generous that its total cost is more than total new funding for all hospitals in America and more than the total provided to all state and local governments”.
Republican leaders have defended the CARES Act amid mounting criticism of lesser-known additions to the relief package, created as part of an effort to reverse a historic economic downturn caused by the coronavirus pandemic.
Senate Finance Committee Chairman Chuck Grassley said in a statement: “Every senator criticising this provision voted for this bipartisan bill, so their complaints about a law they helped write simply stink of partisan politics."
The Joint Committee on Taxation’s analysis, first reported by the Washington Post, came as the IRS issued the first wave of stimulus payments to everyday Americans. Those earning $75,00 or less annually were set to receive the full $1,200, while taxpayers earning more would see smaller amounts based on a sliding scale. No one making more than $99,000 would receive any portion of the economic impact payments included in the CARES Act.
Nearly 17 million Americans lost their jobs since the pandemic began — an unprecedented number that surpassed even the worst losses during the Great Depression. Over 600,000 people in the US have contracted the novel virus, according to data published by Johns Hopkins University, and nearly 25,000 Americans have died.
“Someone wrongly seized on this health emergency to reward ultra-rich beneficiaries, likely including the Trump family, with a tax loophole not available to middle class families,” Mr Doggett said. “This net operating loss loophole is a loser that should be repealed.”
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