Jesse Drucker of the New York Times writes that the federal stimulus bill will bestow a bonanza on the nation’s wealthiest individuals and corporations. While millions of Americans are jobless, and countless small businesses are facing bankruptcy, the 1% are scooping up unearned benefits, thanks to the unscrupulous strategies of Senate Republicans.
Drucker writes:
As the federal government dispenses trillions of dollars to save the economy, small businesses and out-of-work individuals are jostling to grab small slices of aid before the funds run out.
But another group is in no danger of missing out: wealthy individuals and big companies that are poised for tax windfalls.
As part of the economic rescue package that became law last month, the federal government is giving away $174 billion in temporary tax breaks overwhelmingly to rich individuals and large companies, according to interviews and government estimates.
Some of the breaks apply to taxes have long been in the cross hairs of corporate lobbyists. They undo limitations that were imposed to rein in the giveaways embedded in a $1.5 trillion tax-cut package enacted in 2017. None specifically target businesses or individuals harmed by the coronavirus.
One provision tucked into the federal economic-rescue law increases the amount of deductions companies are permitted to take on the interest they pay on large quantities of debt. Only companies with at least $25 million in annual receipts can qualify for that break.
Another change lets people deduct even more of their businesses’ losses from any winnings they reaped in the stock market, sharply reducing what they owe in capital gains taxes. Only households earning at least $500,000 a year — the top 1 percent of American taxpayers — are eligible.
And yet another provision in last month’s rescue package allows companies to deduct losses in one year against profits that they earned years earlier. The tax break most likely won’t put any extra cash directly into the hands of companies hit by the current crisis for at least a year.
The bottom line is that, barely two years after congressional Republicans and President Trump lavished America’s wealthiest families and companies with a series of lucrative tax cuts, those same beneficiaries are now receiving a second helping.
Many of the tax benefits in the stimulus are “just shoveling money to rich people,” said Victor Fleischer, a tax law professor at the University of California, Irvine. While the 2017 tax-cut package was a bonanza for big companies and wealthy individuals, in order to keep the law’s overall costs down it imposed a number of restrictions on who could take advantage of certain tax breaks and how much those taxpayers could reap.
Now, with the 2020 stimulus package, Congress has temporarily repealed a number of those limitations.
“Under the cover of the pandemic, they are undoing the perfectly sensible limitations” that moderated the size of the 2017 tax cuts, said H. David Rosenbloom, a corporate tax lawyer at Caplin & Drysdale and head of the international tax program at New York University’s law school. “And taking into account the giveaways in that act, it’s a joke.”
The new law temporarily undoes a restriction on companies using losses in one year to obtain refunds for previous profitable years. Big companies, including Morgan Stanley, have lobbied on related issues as recently as this year, according to the Center for Responsive Politics.
Senator Charles Grassley, the Iowa Republican who is chairman of the Senate Finance Committee, defended the changes. The stimulus law “threw a much-needed financial lifeline to businesses of all sizes, types and industries to give them the best chance to survive,” he said. He added, “The attempt to paint these bipartisan tax provisions as a boon for particular industries or investors completely misses the mark.”
One of the breaks temporarily rolls back the 2017 restriction on how much debt some companies can deduct from their taxes. That restriction was the subject of lobbying for the last two years by big companies, including Coca-Cola and Hewlett Packard Enterprise, according to federal lobbying records. The National Association of Manufacturers, whose board includes executives from Exxon Mobil, Raytheon, and Caterpillar, has pushed lawmakers for similar changes.
Earlier this month, the Joint Committee on Taxation, a nonpartisan congressional body, found that the two other breaks — those that allow people to deduct only-on-paper losses from their tax bills — would go largely to people making at least $1 million a year.
That analysis came in response to requests by the Democratic lawmakers Representative Lloyd Doggett of Texas and Senator Sheldon Whitehouse of Rhode Island. On Tuesday, Mr. Doggett introduced legislation that would roll back major chunks of the tax breaks. Among other things, it would no longer let people who earn more than $500,000 to immediately deduct all of that year’s business losses from their capital gains.
“Tax giveaways for a wealthy few shouldn’t have come near a coronavirus relief bill,” said Senator Whitehouse, who plans to introduce a Senate version.
The biggest tax break permits wealthy investors in, say, the real estate or energy businesses to use only-on-paper financial losses — such as from writing down, or depreciating, the value of assets — to reduce the taxes they owe on profits from stock market investments.
The New York Stock Exchange. One element of the economic rescue package lets people deduct their businesses’ losses from any winnings they reaped in the stock market, sharply reducing what they owe in capital gains taxes.
The New York Stock Exchange. One element of the economic rescue package lets people deduct their businesses’ losses from any winnings they reaped in the stock market, sharply reducing what they owe in capital gains taxes.
The provision does not single out real estate. But the industry is well known for generating tax losses from depreciation even in profitable years.
The 2017 tax-cut law limited the ability to use those losses. A married couple could shelter only the first $500,000 of their nonbusiness income — such as capital gains from investments — in the year that the loss was generated. Any leftover losses would be rolled over into future years.
The stimulus undoes those restrictions for this year and, retroactively, for 2018 and 2019 — meaning that wealthy households will be able to shield far more of their capital gains from taxation.
The 2017 law also restricted the ability of companies to use so-called net operating losses — which are losses that companies report on their tax returns, even if they are otherwise profitable — to reduce their tax bills. (Net operating losses can include expenses that are only for tax purposes and that don’t reduce profits reported to shareholders.) No longer could such losses from one year be used to retroactively cancel out profits accumulated in previous years, thus generating tax refunds.
The new law temporarily undoes that restriction, enabling companies to use losses in one year to get refunds for previous profitable years.
Big companies, including Morgan Stanley, have lobbied on issues relating to such tax losses as recently as the first few months of this year, according to records compiled by the Center for Responsive Politics.
Among the problems with this tax break, critics say, is that it isn’t aimed at the companies hit by the coronavirus pandemic. Under the new law, companies that will suffer big losses in 2020 won’t be able to use those losses to obtain refunds until they file their tax returns at least a year from now.
The provision will quickly put cash into a company’s pockets if it had tax losses from 2019 or earlier — well before the pandemic — that can be applied against profits from preceding years.
“There’s no reason to send money in a blanket form to all the companies that have net operating losses,” said Mr. Fleischer. “We have some amazingly successful companies that don’t pay tax and have net operating losses, and there’s no reason to be subsidizing these companies or expect that money will find its way down to the employees.”
The tax breaks for companies that report losses are likely to be especially lucrative because the 2017 tax law created new deductions that could generate large paper losses — for tax purposes only — for otherwise profitable companies in 2018 and 2019. For example, the 2017 law permitted companies to fully write off certain types of investments in the first year, instead of stretching those deductions over several years. That, in turn, meant companies could report profits to their shareholders but losses on their tax returns.
A third break, worth more than $13 billion over a decade, temporarily loosens 2017 restrictions on how much interest big companies can deduct on their tax returns. Private equity firms, which rely on borrowed money to generate big profits, have been urging the Treasury Department to write favorable rules governing the restrictions on how much interest on their debt companies can deduct from taxes.
The private equity industry is poised to benefit from the rescue package. Companies with at least $25 million in annual revenue are now eligible to deduct more interest from their tax bills — a change that will make the private-equity business model even more lucrative. Private equity firms amplify their profits by using borrowed money to finance their investments. Deducting even more of the interest on that debt from their taxes would further boost their profits.
The tax break “allows private equity to swoop in and scoop up struggling businesses,” said Matthew Rappaport, a tax lawyer who specializes in private equity at Falcon Rappaport & Berkman in New York.
Jesse Drucker is an investigative reporter for the Business desk. He previously worked for The Wall Street Journal and Bloomberg News where he won a pair of awards in 2011 for investigative and explanatory reporting from the Society of American Business Editors and Writers for a series on how U.S. multinationals shift profits into tax havens. @JesseDrucker
I guess you could call this corporate communism since wealth is basically just being redistributed, but in the upwards direction.
Corporate welfare that gives away money to the already rich and powerful while the unemployed starve and become homeless.
My first thought: “Les Misérables”
The US is now a banana republic. Utter corruption. All that’s missing is the plantations. But I’m sure that Propaganda Minister Stephen “Goebbels” Miller would like to see those brought back, too.
And Mitch McConnell represents one of the poorest states in the country.
One step away from a banana republic. The U.S. isn’t all the way there yet.
There is only one thing left to check off the list to become a banana republic. The military has to stage a coup, round-up the Trump administration, throw them in jail, and declare martial law. In time, the generals and colonels will allow another democratic election and then step back to see if the civilians can clean up their act.
Well observed, Lloyd! When IQ45 followed Vlad’s instructions and abandoned our Kurdish allies, I wondered whether that might happen. When that happened, smart people in our military got a very clear reading of where Trump’s interests lie.
Unfortunately, militaries usually do just the opposite of allowing democratic elections. They usually serve the dictators.
The military is illsuited to democracy, which is why the framers of our Constitution specified that the civilians (Congress and the President) be in charge of the military.
Military coups are very bad ways of dealing with leadership problems.
And the crux of the issue: who decides when the military should replace a leader?
Who (usually generals and colonels) in the military decides it is time to step in and remove a president to save the U.S. Constitution depends on the threat of that president to the U.S. Constitution.
I hope it doesn’t come to that, but it will not be an illegal act if the military leaders decide to step in and remove a president and his administration to save our Constitutional Republic.
The Oath officers/leaders of all 7 federal uniformed services take “ensures that the Constitution is supreme and that the president executes laws accordingly.
“That the president is treated as a citizen under the Constitution rather than as the supreme authority of the land says something special about the nature of the U.S. government and the foresight of the founding fathers, Pinkert says.
“Their ideas on presidential power are reinforced when the oath is publicly administered every four years, even when a president is re-elected.”
https://www.npr.org/templates/story/story.php?storyId=99323353
Has anyone figured out that with trillions of $$$$ redistributed in the wrong direction, it’s just a distraction and disguise to shutter Social Security. The premise from the Feds will be that the government just does not have any more money because they HAD to give it out to save millions of lives during the pandemic.
I’m 56, and I’m not counting on getting mine, even though I’ve paid into it for 37 years.
My premise is going to hated by many on this blog, but it has to be said.
And BTW, with regard to the how the government has handled helping people during COVID, is anyone as angry and as truthful as this? I personally can think like and feel this, but cannot seem to articulate it this way:
That was the laugh of the day!
Mamie Krupczak Allegretti: This video wasn’t funny but it certainly hit on the truth. Why isn’t the government helping average/poor people? The wealthy and corporations don’t need more.
Disgusting.
LOVE this! I like this man on my side…even with his potty mouth.
Thanks for sharing that, Robert! This guy is hilarious.
Though, ofc, what he’s saying isn’t. Comedy often has this dark side.
Ticked-off Vic is right on the money with his thesis AND sentiments, and doesn’t even cover all the bases.
The $1200 is still “in the mail” for a huge # of taxpayers – people who file taxes by mail, and/ or don’t have the tech or ability to jump thro extra hoops reqd for anyone whose bank info isn’t already w/IRS: low-income non-taxfilers, maybe chose to receive return by check, et al details…
And that’s just the stimulus check! “Non-essential” indy contractors/ 1099-Sch C filers/ gigworkers [including both my sons] get zero response from banks even tho PPP supposedly covers them. Their “lifeline” is unemployment insurance– and people are spending FT days trying to get thro to their states’ systems without success .
No wonder we see pix of miles-long car-queues for charitable food donations.
Bonanza Republic
Bonanza for the rich
Banana for the poor
For latter, life’s a bitch
For former, ever more
This is orthodox Republican economic policy. Has been since Reagan. Corporations and the rich make out well, and everybody else gets stuck with the bill.
This country is now officially being run by banana republic congressional people and a greedy dimwitted moron.
I’m still waiting for my ONE $1200 that will surely pay the mortgage payment, heat, electricity, gas to go shopping, food and insurance on car and condo for the next 10 months.
Word of advise: Don’t drink any bleach to keep from getting COVID-19. Also, stay away from UV tanning beds. The Moron’s prescriptions for getting healthy prove he is demented. No, he wasn’t being sarcastic when he prescribed this nonsense. He is still trying to prove that he got all of his brains from his uncle who went to MIT.
More Wealthfare for the Überwealthy
That’s what we do, isn’t it? Built into our system. Banks lend ordinary schmucks nonexistent money (10x the other people’s money that they have on deposit), and then those ordinary schmucks repay with real earnings, with interest, over a lifetime. So, in effect, they became bank-owned chattel. The system is built, from Day 1, to enrich the rich and enslave ordinary people. And now we have the choice, in the upcoming election, between Vlad’s Asset Orange and Status Quo Joe, the Bankers’ Friend, whom we HAVE to vote for because four more years of Trump would be suicidal.
Wonder why? One reason may be this: fifty percent of the members of Congress are millionaires. Another is that lobbyists for the wealthy wrote the bill and handed off a ready-to-use version to their favorite members of Congress. This giveaway also benefits Trump, Inc. Moscow Mitch thinks it is the perfect way to let states go bankrupt, kill pensions for public service employees, and cut the ranks of public employees. The bill is 100 percent pure on current Republican values.
Apparently, having lobbyists involved in writing bills is more common than we know. This practice is the first shock that AOC revealed to the public when she said, “I don’t think lobbyists should be writing bills.”
Our Fourth Branch of Government, ALEC, long ago automated the process of writing boilerplate bills for the Corporate Owned Ripofflichen Party (CORP). But the civics textbooks most folks never read in school anyway have yet to be updated on the facts of modern American dumbocracy.
But I’m just being sarcastic, of course …
I agree with you and AOC, retired teacher.
Lobbyists get paid HUGE amounts of money, too … not to mention the perks.
I have no use for Lobbyists.
AOC voted against the new relief package because she said it did not include mortage and rent relief for working families. https://www.newsweek.com/alexandria-ocasio-cortez-explains-why-she-voted-against-coronavirus-relief-package-1499998?fbclid=IwAR21_OrOqfvz5YjzPBRfR5tk9tsExzZv2hOZB9U7t7JAjb5uSs8-1GTl9VM
Jon
I think you meant to say “Our Fifth Column of Government, ALEC…”
Jon. You nailed it.
I read once, Laura, that the average congressperson comes into office the first year with a net worth of a quarter of a million, earns 174K a year, and somehow is worth millions after he or she has been in office a few years. I guess that becoming a Senator or Representative vastly increases one’s completely independent stock-picking judgment. LOL.
SO, what else is new?
Some very insightful comments above.
Meat packing plants are closing all over the country. This will affect our food supply. This is from the Chicago Tribune. St. Charles is in Illinois.
………………………………..
1:22 p.m.: Kane County Health Department orders closure of St. Charles meat processing plant
The Kane County Health Department on Friday ordered a Smithfield meat processing plant in St. Charles to close due to “concerns about COVID-19.”
The order temporarily closes the facility to allow the health department to work with the company on “mitigation efforts” and “providing education relative to social distancing and employee safety relative to personal protective equipment,” according to a statement from the health department.
The health department on Saturday declined to say whether any workers there were diagnosed with COVID-19 or provide more information about the order.
Smithfield declined to say whether COVID-19 cases were diagnosed in the facility, but said the company is cooperating with the health department. The order comes on the heels of a federal lawsuit filed Thursday by an anonymous worker and an advocacy group alleging unsafe working conditions in a Smithfield plant in Missouri.
The St. Charles plant is the latest closure for the Virginia-based company, which has halted work at facilities across the country where workers have become sick, including at another Illinois facility in downstate Monmouth.
The St. Charles facility, a dry sausage plant that employs 325 people, already was in the process of instituting “rolling closures,” according to a company press release earlier this month.
Before the health department order, the company’s plan was to halt incoming raw materials from April 19 to May 2, close two of three departments between April 22 to May 3 and close the final department from May 7 to May 9.
The employees were to be paid during the rolling closure, according to the release.
The St. Charles closure order came on the same day that the company announced it was voluntarily closing its Monmouth plant after employees there tested positive for COVID-19.
The plant, located in Monmouth, about 200 miles southwest of Chicago, will shut down next week until further notice, according to a press release. Employees will be paid during the closure.
The company said a “a small portion” of the plant’s 1,700 employees tested positive for the virus.
The Monmouth plant produces about 3% of fresh pork supplies in the U.S., the release said.
The company stocks its facilities with personal protective equipment and has “implemented thermal scanning companywide and installed plexiglass and other physical barriers on production floors and in break rooms,” according to the release.
But social distancing is “particularly challenging” at meat processing plants because of the assembly line production, the company said.
The lawsuit, filed Thursday in a Missouri federal court, accuses Smithfield of creating a public nuisance at its Milan, Mo. plant with unsafe working conditions, including requirements to stand shoulder-to-shoulder and go for long periods without breaks to wash hands.
According to United Food and Commercial Workers International, a union representing 200,000 food production workers, some 5,000 of its members at unionized meatpacking plants across the country have tested positive for COVID-19 or been exposed to someone who tested positive, and 10 members have died.
At food processing facilities, another 1,500 of its members have become sick and three have died, the union said.
In addition to the Monmouth plant, Smithfield has closed plants in South Dakota, Wisconsin and Missouri, raising concerns about how the pandemic will impact the nation’s meat supply. —Madeline Buckley
Wondering what people think of whether or not charter schools are eligible for Paycheck Protection Program (PPP) forgivable loans. The eligibility criteria is that “uncertainty of current economic conditions makes this loan request necessary to support ongoing operations.” Govt entities (would this include district schools?) are not eligible to apply. Are charter schools funding streams in jeopardy? In jeopardy any more than the district schools which aren’t allowed to apply?
Charter schools think they are and are applying for federal coronavirus relief, even though they suffered no financial harm.
What the Great Pandemic Novels Teach Us
People have always responded to epidemics by spreading rumor and false information, and portraying the disease as foreign and brought in with malicious intent.
…These unexpected and uncontrollable outbursts of violence, hearsay, panic and rebellion are common in accounts of plague epidemics from the Renaissance on. Marcus Aurelius blamed Christians in the Roman Empire for the Antonine smallpox plague, as they did not join the rituals to propitiate the Roman gods. And during subsequent plagues Jews were accused of poisoning the wells both in the Ottoman Empire and Christian Europe.
The history and literature of plagues shows us that the intensity of the suffering, of the fear of death, of the metaphysical dread, and of the sense of the uncanny experienced by the stricken populace will also determine the depth of their anger and political discontent.
As with those old plague pandemics, unfounded rumors and accusations based on nationalist, religious, ethnic and regionalist identity have had a significant effect on how events have unfolded during the coronavirus outbreak. The social media’s and right-wing populist media’s penchant for amplifying lies has also played a part.
But today we have access to a greater volume of reliable information about the pandemic we are living through than people have ever had in any previous pandemic. That is also what makes the powerful and justifiable fear we are all feeling today so different. Our terror is fed less by rumors and based more on accurate information.
As we see the red dots on the maps of our countries and the world multiply, we realize there is nowhere left to escape to…