Washington, DC – Today, Senator Sheldon Whitehouse (D-RI), Representative Lloyd Doggett (D-TX), Senator Sherrod Brown (D-OH), Representative Rosa DeLauro (D-CT), and Representative Steve Cohen (D-TN) led a group of 120 total Democratic members of Congress to urge House and Senate leadership to repeal a massive tax giveaway for a small number of extremely wealthy taxpayers that Republicans slipped into must-pass pandemic-relief legislation last year. The members call for funds to flow to Americans fighting to make ends meet in the midst of the COVID-19 crisis, not rich real estate investors and hedge fund managers. To unwind the tax giveaway and redistribute its benefits to working Americans, the members reintroduced the CARES Windfall for the Wealthiest Repeal Act, which passed the House of Representatives twice last year as part of the Heroes Act and Heroes 2.0 but was blocked in the Republican-controlled Senate.
These tax breaks for so-called “net operating losses” in the Coronavirus Aid, Relief, and Economic Security (CARES) Act were estimated by the nonpartisan Joint Committee on Taxation (JCT) to cost more than the assistance to hospitals included in that legislation and to overwhelmingly benefit a narrow set of wealthy taxpayers.
“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,” the members write. “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.”
Further, the lawmakers stated, “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….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.”
The lawmakers close their letter by recommending the millions saved by ending the giveaway go toward relief for Americans suffering from the pandemic.
The CARES Windfall for the Wealthiest Repeal Act would:
- Repeal Section 2304 of the CARES Act, which removed a limit that prevented wealthy owners of pass-through businesses from using active business losses to offset nonbusiness income in excess of $500,000, such as capital gains income. This legislation would reinstate this limit on a permanent basis, which only applies to the narrow slice of the top 1%, particularly hedge funds and real estate developers.
- Limit the ability to carryback losses to businesses experiencing losses during the pandemic by:
- Allowing only losses from 2020 and 2019, to be carried back to offset tax paid in prior tax years. Businesses that experienced losses multiple years prior to the pandemic when the economy was growing should not be advantaged over businesses coping with losses stemming from the pandemic.
- Limit carrybacks of 2020 losses to two prior tax years. This provision will prevent tax arbitrage that would result from being able to get a refund on taxes paid at the higher corporate rate prior to enactment of Republican tax law.
Read the full text of the letter here or below:
The Honorable Nancy Pelosi
Speaker
U.S. House of Representatives
Washington, DC 20515
The Honorable Charles Schumer
Majority Leader
U.S. Senate
Washington, DC 20510
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.
