The story begins in late 2017. The Man Who Lost the Popular Vote and his fellow Republicans had just come off a bruising defeat in their attempt to repeal Obamacare. They then pivoted to the one thing they wanted to do above all, the one goal that united them all like nothing else could: cutting taxes for millionaires and billionaires.
The problem? Passing most legislation requires 60 votes in the U.S. Senate—and there were only 51 Republican Senators. However, certain measures can pass with a simple majority thanks to the Byrd Rule, and Senate Republicans aimed to pass their Rich Man’s Tax Cut using the process created by the Byrd Rule, known as reconciliation.
The reconciliation measure created by Republicans that year required that their bill add no more than a total of $1.5 trillion over the decade after passage, and that it be revenue-neutral or cut the deficit in the years after that. Even as late as November 2017, the Republicans couldn’t seem to get their proposed bill to fit within those parameters.
One of the changes Republicans made was to set a cap on the total of business losses (at $250,000 for an individual tax filer and $500,000 for a married couple) that could be counted against—and thus offset—other income received from outside the business that year.
Emily Cochrane and Sheryl Gay Stolberg at The New York Times made clear what this change would mean, and whom it would most often affect.
When real estate investors generate losses from gradually writing down the value of their properties, a process known as depreciation, they can use some of those losses to offset other taxes. The result is that people can enjoy big tax breaks stemming from only-on-paper losses, even if they enjoy big cash profits in the real world.
But the use of those losses was limited by the 2017 tax-cut package. The losses could be used only to shelter the first $500,000 of a married couple’s nonbusiness income, such as capital gains from investments. Any leftover losses got rolled over to future years.
Real estate investors? I know I’ve heard something about real estate investors having quite a bit of clout in this White House. Joking aside, both Trump and his son-in-law Jared Kushner only have fortunes because of real estate investments made by their fathers. Please recall that the law as it existed before December 2017 allowed both men to avoid paying federal income taxes for many years in which they had large incomes because they offset that money with real estate depreciation “losses”—losses that existed only on paper—from a previous year. Bully for them.
Given Donny and Jared’s legal tax evasion, you might wonder why Republicans would have signed off on these changes—keep in mind that the legislation passed without a single Democratic vote in the House or Senate. Fret not, defenders of all things Trump, for your concerns have since been addressed. All it took was a little old pandemic, and the unemployment rate shooting up to around 25% in a matter of a few days! As Cochrane and Stolberg detail, the CARES Act essentially gave away billions by undoing the limits contained in the 2017 tax plan regarding the use of business losses to reduce one’s overall tax bill.
The new stimulus bill lifts that restriction for three years — this year, and two retroactive years — a boon for couples with more than $500,000 in annual capital gains or income from sources other than their business. That group comprises the top 1 percent of taxpayers, according to Internal Revenue Service data.
Imagine the kind of people who consider that, once people are starting to die in large numbers, and the job losses have reached the tens of millions, and everyone’s in an absolute panic, it’s exactly the right time to raid the Treasury to help the top 1%. As far as I can tell, when it comes to Republicans, there’s really never a wrong time to do that.
Did you notice that the coronavirus stimulus bill also allows these lucky duckies—the kind of people who are waiting for someone to teach them how to use a Tide pod because the housekeepers can’t come to work anymore—to write off unlimited losses from 2018 and 2019? In other words, losses that were in no way caused by the coronavirus? Democrats must emphasize to voters that the giveaways to the wealthiest among us in the CARES Act have nothing to do with making people whole who were hurt by the pandemic.
A stunning 80% of the tax breaks resulting from these various measures goes to a tiny number of multimillionaires; 43,000 to be exact. They will each receive an average of $1.6 million this year. But hey, those people earning less than $75,000 this year are getting a $1,200 stimulus check, and that’s a number too, so it’s all good, right? These provisions will ultimately cost our government $195 billion, yet we’ve only sent $100 billion to hospitals since the pandemic began. Does that make any sense to you?
How did this huge bonanza for the top 1% make it into the CARES Act in the first place? And what about Democrats—don’t they run the House of Representatives? These are important questions. Akela Lacy is a reporter at The Intercept, a media outfit not exactly known as being a partisan cheerleader for elected Democrats.
Lacy wrote that the “massive millionaire tax break was tucked into the final version of the coronavirus stimulus package without the knowledge of a number of Democrats, even though their party colleagues on the Senate Finance Committee had fought to block it during earlier negotiations—highlighting, at best, a breakdown in communication within the party and among the two chambers.”
As for the House, she added that the bill passed that chamber even though “many members—including some in leadership—[were] either unaware that the tax break provision even existed, or unwilling to raise it publicly.” I wouldn’t say Democrats in Congress come out smelling like a rose here, but this was clearly not something they supported or, for the most part, even knew about, according to what at least five of them told Lacy.
Speaker Nancy Pelosi’s office, without saying whether she knew about these measures before the CARES Act passed, slammed the tax giveaways: “The CARES bill that came out of the Senate negotiations had things that we like and things that we don’t. Democrats secured some absolutely life-and-death wins for workers and families, but as ever, we have seen how devious the GOP majority in the Senate is about sneaking in tax giveaways to the wealthiest few.”
The spokesperson for Massachusetts Rep. Ayanna Pressley, who sits on the House Committee on Oversight and the Committee on Financial Services, told Lacy that the members, leaders, and staff of those committees were not made aware of last-minute changes to the bill—including the provisions referenced here—made by Republican Senate staff members. Rhode Island Sen. Sheldon Whitehouse’s spokesperson also told Lacy that he didn’t know about them being in the bill, the text for which was finalized less than 60 minutes before Senators had to vote on it.
After the CARES Act passed and the details were scrutinized more carefully, a number of Democrats expressed outrage, including California Rep. Ro Khanna. Khanna, who sits with Pressley on the Oversight Committee and serves on the Budget Committee, also told The Intercept that he didn’t know about these measures before the vote. (Two other House Democrats who did not go on the record told Lacy the same thing.)
Democrats have also taken action. Sen. Whitehouse and Texas Rep. Lloyd Doggett have been at the forefront. They asked the Joint Committee on Taxation to examine the CARES Act tax breaks for the top 1%, and they’ve been out there screaming bloody murder about the results of this “reverse-Robin Hood” insanity.
Here is another way to think of this massive giveaway: The money spent on these tax breaks would pay for hundreds of N95 masks for every person in America plus 1 million hospital-grade ventilators, eliminating the national shortage. Front-line responders across the country struggle desperately for personal protective equipment (PPE). This money could have surged PPE to the front lines, instead of sending millions to the highest income folks, quarantined in their country estates.
Making matters worse, unlike the small business relief in the CARES Act, these tax breaks came with no strings attached. Companies have no requirement to continue paying employees or to provide sick leave. Even some passive investors—with no employees—could get the benefit.
As former Vice President Joe Biden correctly observed, the “tax cut overwhelmingly benefits the richest Americans and is unnecessary for addressing the current COVID-19 economic relief efforts.” If we are at war with the coronavirus — as President Trump often claims — this is war profiteering.
On April 24, Doggett and Whitehouse—along with Sens. Warren, Sanders, and 15 other senators, as well as 40 House Democrats—put forth a proposal to re-Robin Hood things a bit, namely by undoing these ridiculous measures.
In a statement, Sen. Whitehouse summarized the situation: “Tax giveaways for a wealthy few shouldn’t have come near a coronavirus relief bill. Relief legislation ought to address the needs of small businesses and workers, not fleece taxpayers to benefit real estate moguls and hedge fund billionaires. By repealing these special interest giveaways, we can free up billions of dollars for federal assistance our communities and economy so desperately need.”
And this isn’t even the only measure in the CARES Act that demonstrates Trump and the Republicans’ disdain for America’s nonmillionaires. Those one-time stimulus checks going to middle- and lower-income Americans aren’t actually going to get to a good number of them.
You see, the Trump White House, taking advantage of a failure to “explicitly designate these emergency stimulus payments as exempt from garnishment, as similar government payments (such as Social Security, disability and veterans’ benefits)” told banks that they could simply pilfer funds deposited on behalf of any customer who owed them fees or otherwise had a negative balance. Thus, stimulus checks meant to help people pay their bills—and thus spend money in the economy and keep other people in their jobs—simply fattened the bottom line of banks. Just another way Republicans used COVID-19 to help the rich get richer at the expense of the rest of us.
Even the measures taken by Congress that were meant to directly help working people only became law over the vociferous objections of Republicans.
This is what Trump and his party do and say on a consistent basis. Citing numerous other examples, former Labor Sec. Robert Reich demonstrated clearly that the Orange Julius Caesar believes in “socialism for the rich, capitalism for everyone else.”
The American people have come to see this about Trump. According to a March 2020 survey conducted by Democracy Fund-UCLA Nationscape, a whopping 83% of respondents expressed a belief that Trump cares about the wealthy (compared to 60% who said so about Joe Biden). Only 45% said Trump cares about the middle class, 38% said he cares about the poor, and 40% said he cares about “people like me.”
I’ve said this before, and I’ll keep saying it: Democrats must put this contrast at the center of their campaign message. Republicans care only about the rich, while Democrats care about every American. Biden made a powerful call for a new coronavirus stimulus package, one that Daily Kos’ Joan McCarter explored in detail, noting that it was “much bigger and greener” than the CARES Act. He must keep on making these kinds of contrasts as we race ever closer to Trump’s day of reckoning with voters.
Looking backward for a moment, whether Trump and his Republican friends always planned to repeal the provisions from the Rich Man’s Tax Cut under discussion here, and simply used the emergent need to pump money into our economy during a pandemic to pull it off is something that, at this point, cannot be proven. But I certainly wouldn’t put it past them.
Every day, the highest priority for Trump, McConnell & Co. is to use their power to take more money from middle-class and working-class Americans and put it in the pockets of millionaires and billionaires. That was true the day before the coronavirus outbreak began, it was true the day the CARES Act was written, and it will be true the day the virus is behind us. As voters, it is our responsibility to bring about a day when they no longer possess the power to do so.
Ian Reifowitz is the author of The Tribalization of Politics: How Rush Limbaugh’s Race-Baiting Rhetoric on the Obama Presidency Paved the Way for Trump (Foreword by Markos Moulitsas)