Tax change in coronavirus stimulus package overwhelmingly benefits millionaires
Change will cost taxpayers nearly $90B in 2020
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More than 80 percent of the benefits of a tax change included in the coronavirus stimulus package that President Trump signed into law at the end of March will go toward Americans who earn more than $1 million annually, according to a nonpartisan congressional committee.
The provision, placed into the legislation by Senate Republicans, temporarily suspends a limitation of how much certain business owners can deduct against their nonbusiness income to reduce their tax liability. The limitation was initially established as part of the Republican-passed 2017 Tax Cuts and Jobs Act.
The change will cost taxpayers nearly $90 billion in 2020, according to a new report by the Joint Committee on Taxation (JCT), the nonpartisan congressional body.
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Nearly 82 percent of the benefits from the tax law change will go toward people who make more than $1 million. In total, 95 percent of the individuals who will benefit from the change earn at least $200,000, the committee found.
Prior to the $2.2 trillion CARES Act, owners of businesses formed as pass-through entities could deduct a maximum of $250,000 in losses from nonbusiness income like stocks and bonds. That limitation has since been removed.
The JCT estimated that 43,000 people making $1 million or more would owe a total of $70.3 billion less in taxes in 2020. Less than 3 percent of the benefits from the tax change would go to Americans earning less than $100,000 a year.
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Two Democratic lawmakers, Sen. Sheldon Whitehouse, D-R.I., and Rep. Lloyd Doggett, D-Texas, requested the analysis. Whitehouse called for the provision to be repealed after the analysis was released.
“It’s a scandal for Republicans to loot American taxpayers in the midst of an economic and human tragedy,” Whitehouse said in a statement. “This analysis shows that while Democrats fought for unemployment insurance and small business relief, a top priority of President Trump and his allies in Congress was another massive tax cut for the wealthy. Congress should repeal this rotten, un-American giveaway and use the revenue to help workers battling through this crisis.”
But Republicans have defended the provision, maintaining that it helps businesses have more cash flow that they can use to retain their employees during the virus outbreak, which has paralyzed the U.S. economy and forced businesses deemed nonessential to shut down.
“The CARES Act helps businesses keep the lights on and employees on payroll as much as possible to get through this crisis,” a spokesman for Senate Finance Committee Chairman Chuck Grassley, R-Iowa, told The Hill. “Every senator criticizing this provision voted for this bipartisan bill, so their complaints about a law they helped write simply stink of partisan politics.”