Millionaires to reap 80% of benefit from tax change in US coronavirus stimulus
Millionaires and billionaires are set to reap more than 80% of the benefits from a change to the tax law Republicans put in the coronavirus economic relief package, according to a non-partisan congressional committee.
The change – which alters what certain business owners are allowed to deduct from their taxes – will allow some of the nation’s wealthiest to avoid nearly $82bn of tax liability in 2020.
Nearly 82% of the benefits from the tax law change will go to people making $1m or more annually in 2020, according to an analysis by the joint committee on taxation (JCT). Overall, 95% of individuals who benefit from the change make $200,000 or more.
Taxpayers will lose nearly $90bn from the change, which suspends a restriction introduced in the 2017 tax bill.
The change allows owners of businesses known as pass-through entities to lower their taxes by deducting as much as they want against income unrelated to the business.
Before, owners of pass-through entities could deduct a maximum of $250,000 in losses from non-business income such as stocks and bonds. This limitation was introduced in the 2017 tax law as a way to offset other tax benefits going to firms.
Republicans said it was a mistake to include the provision in the 2017 legislation and moved to temporarily suspend it in the $2tn Coronavirus Aid, Relief, and Economic Security (Cares) act passed in late March.
Because of the suspension, the JCT estimated 43,000 people making $1m or more would owe a total of $70.3bn less in taxes in 2020. Less than 3% of the benefits from the change will go to Americans earning less than $100,000 a year.
Steve Rosenthal, a tax expert at the Tax Policy Center, a non-partisan thinktank, told the Washington Post hedgefund investors and owners of real estate would benefit most from the change.
Alan Viard of the American Enterprise Institute thinktank said the change should be made permanent. “The tax relief gives businesses badly needed liquidity during the coronavirus pandemic while also reducing the tax penalty on risky business investments,” Viard wrote in a blogpost.
The JCT analysis was prompted
by two Democratic senators seeking more information from Donald Trump’s administration about changes to the tax law included in the coronavirus relief package.
In a letter last week, senators Sheldon Whitehouse, of Rhode Island, and Lloyd Doggett, of Texas, said they were specifically seeking information about whether any people in the Trump administration who were involved with developing the changes would also benefit from the provisions.
After the analysis was published, Whitehouse called for this provision to be repealed.
“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.