As The Intercept’s Akela Lacy reported last April, Democrats on the Senate Finance Committee tried to cut the millionaire tax break from the CARES Act during the negotiation process but were ultimately unsuccessful. The panel’s Democrats then failed to alert their colleagues to the provision, which made its way into the final legislative package and into law.
“A spokesperson for Massachusetts Democratic Rep. Ayanna Pressley, a member of the House committees on financial services and oversight, said Republican Senate staffers added the provision at the last second to the final bill text, and that relevant leadership and committee staff did not have a heads-up,” Lacy reported. “California Rep. Ro Khanna, a member of the House committees on oversight and budget, said he found out about the provision after seeing reporting from the Washington Post.”
After a Joint Committee on Taxation analysis released shortly after the provision’s passage showed the tax cut would overwhelmingly benefit rich Americans—including wealthy hedge fund and real estate investors—Whitehouse said in a statement that “Congress should repeal this rotten, un-American giveaway and use the revenue to help workers battling through this crisis.”
Read the 120 Democrats’ full letter:
Dear Speaker Pelosi and Leader Schumer:
As we continue to debate allocating limited resources to stimulate the economy, we write to bring your attention to costly tax breaks for so-called “net operating losses” that Republicans tucked into the CARES Act. These special-interest giveaways will confer over 80 percent of the benefits to just 43,000 taxpayers, each earning at least $1 million per year. We urge you to repeal these unwarranted tax cuts, as HEROES and HEROES 2.0 proposed and President Biden has recommended. This would save over $250 billion, which should be repurposed to help Americans who have lost income due to the pandemic and its economic fallout.
According to Mark Zandi, chief economist of Moody’s Analytics, NOL tax breaks are the least effective way to stimulate the economy of over 20 policies reviewed, generating just 27 cents of GDP for every dollar of federal cost. What’s more, these ineffective giveaways benefit a narrow set of high-income taxpayers, including hedge funds, real estate developers, and likely the Trump family.
The Trump tax law placed temporary restrictions on NOL gimmicks in order to raise revenue for other tax cuts in the bill. These were among the few provisions of the Trump tax law that, standing alone, pushed the tax code in a progressive direction. We support restoring these limitations and making them permanent. Making them permanent alone could save the federal budget over $100 billion.
The repeal of NOL limitations in the CARES Act had little to do with pandemic relief and arbitrarily rewards business owners who lost money before the pandemic began. Making matters worse, unlike the small business relief provided through the Paycheck Protection Program, these windfalls come with no strings attached to ensure they support payroll or critical business operations.
In addition to presenting immediate hardships, the COVID-19 pandemic has laid bare and magnified our nation’s troubling economic inequality. Relief must address this inequality, not exacerbate it. The CARES net operating loss provisions will further worsen economic inequality by providing an average tax break of $1.6 million to just 43,000 very high-income taxpayers. This is unacceptable, especially when compared to the limited relief most Americans have received.
We urge you to repeal the NOL giveaways by including sections 20301 and 20302 of the HEROES Act in the next COVID-19 relief legislation. Further, we ask that you repurpose these funds to provide relief for families struggling though this challenging time.
This article is republished from Common Dreams under a Creative Commons license. Read the original article.