Coronavirus CARES Act Benefits 43,000 Millionaires; Each To Receive Up To $1.6 Million Tax Cut

Senate Republicans inserted a tax loophole provision in the Coronavirus Aid, Relief, and Economic Security (CARES) Act that will see 43,000 millionaires indirectly receive up to $1.6 million each in stimulus money.

Signed into law on March 27, the $2.2 trillion CARES Act was enacted to provide cash relief for American workers made jobless by the COVID-19 pandemic. It includes $500 billion in direct payments to Americans, $208 billion in loans to major industry and $300 billion in Small Business Administration (SBA) loans.

Analysis from the Senate's Joint Committee on Taxation (JCT) uncovered the massive windfall for the wealthy. In a report published on the Senate's website, it said 43,000 individual tax filers covered by one of the provisions will see their tax liability plunge by a combined $70.3 billion in 2020. Its analysis shows nearly 82% of the people that will benefit from the provision make $1 million or more annualy, while 95% make over $200,000.

"Senator Sheldon Whitehouse, D-RI, and Lloyd Doggett, D-TX, released analysis today from the Joint Committee on Taxation (JCT) showing a massive windfall for a small group of wealthy taxpayers from a Republican provision in the coronavirus relief bill," the report read.

Hedge-fund investors and real estate business owners are “far and away” the ones that will benefit the most from the provision. Some reports say among the beneficiaries of the tax giveaway might be president Donald Trump, his son-in-law Jared Kushner, and “real estate investors in President Trump’s inner circle.”

Less than 3% of the benefits from this Republican loophole go to Americans earning less than $100,000 a year. Senate Democrats said a wealthy few will receive an average windfall of $1.6 million, far exceeding the bill’s $1,200 payments for working Americans.

Sen. Doggett explained that for those earning $1 million annually, a tax break buried in the recent coronavirus relief legislation is so generous 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.

“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,” said Doggett. “This net operating loss loophole is a loser that should be repealed.”

The Republican provision temporarily suspends a limitation on how much owners of businesses organized as pass-through firms can deduct against their nonbusiness income to reduce their tax liability, said The Washington Post. A pass-through business is one taxed under individual income rather than corporate.

The suspension of this limitation gives pass through firms an unlimited amount of deductions against their non-business income such as capital gains. These firms can also use losses to avoid paying taxes in other years.

This loophole gives some 43,000 individual tax filers that make at least $1 million a year a savings of $70.3 billion, or $1.6 million apiece. JCT said suspending the limitation will cost taxpayers $90 billion in 2020 alone.

This loophole plus a set of tax changes inserted by Republicans will add close to $170 billion to the national deficit over the next 10 years. Congressional Democrats and some tax experts are assailing the loophole as a giveaway to the wealthy and real estate investors. For their part, Republicans claim suspending the limitation provides liquidity for firms by reducing their tax obligations.

“It’s a scandal for Republicans to loot American taxpayers in the midst of an economic and human tragedy,” said Sen. Whitehouse. “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.”