Coronavirus Relief Bill Includes Tax Benefit for Millionaires That Will Cost Taxpayers $90 Billion

Inside the historic $2.2 trillion relief package passed by Congress last month is a tax change that overwhelmingly benefits millionaires.

More than 80 percent of the benefits from the new provision will go to Americans earning more than $1 million annually, according to a report released last week by the nonpartisan Joint Committee on Taxation. Less than 3 percent of the benefits from the change will go to people earning less than $100,000 a year.

The change is estimated to cost taxpayers about $90 billion in 2020 and will add roughly $170 billion to the federal deficit over the next decade, the congressional committee's report found.

"It's a scandal for Republicans to loot American taxpayers in the midst of an economic and human tragedy," Democratic Senator Sheldon Whitehouse of Rhode Island said in a statement after the report was released.

Thornton Matheson, a senior fellow at the nonpartisan Tax Policy Center, said the tax change was "a very bad use of the money" provided by the relief package. The measure is the second-largest tax cut in the legislation.

"I don't think that is a good measure in the sense that it's not focused on the people who are most severely affected by this crisis. Surely, the wealthy partnership owners will be affected but not to the extent of low-income households," Matheson told Newsweek. She added that the tax break is going to "provide little stimulus to the economy."

The Joint Committee on Taxation completed the report at the request of Whitehouse and Representative Lloyd Doggett. A Democrat from Texas, Doggett noted that the tax change is more than the new funding provided for hospitals and for state governments by the Coronavirus Aid, Relief and Economic Security (CARES) Act.

"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," Doggett said in a statement. "This net operating loss loophole is a loser that should be repealed."

us capitol reflected ambulance COVID-19 pandemic 2020
The U.S. Capitol is reflected in a standby ambulance on March 27. The historic coronavirus relief bill passed by Congress last month contains a tax change that will overwhelmingly benefit millionaires. Alex Edelman/AFP/Getty Images

The tax break is a reversal of restrictions imposed by GOP lawmakers in the 2017 tax law. The change will suspend a limitation on how much certain business owners can deduct against their nonbusiness income. Now, business owners can lower their taxes by deducting as much as they want against income unrelated to the company.

The Joint Committee on Taxation estimated that 43,000 people making more than $1 million would owe roughly $70 billion less in taxes this year because of the suspension.

As Democrats criticize the tax change for being too broad and for benefiting high earners, Republicans have highlighted the fact that these lawmakers still supported the CARES Act. All Senate Democrats voted for the legislation, which was passed by unanimous consent on March 27.

Republican Chuck Grassley, chairman of the Senate Finance Committee, wrote in an op-ed for Fox News that Democrats are simply trying to score "political points" by condemning the tax change.

"This partisan attack threatens the relief intended for businesses in every industry across America. The attempt to paint this tax provision as a boon for real estate and hedge fund investors completely misses the mark," Grassley wrote. "Notably, the CARES Act did not change the longstanding limits on investors being able to benefit from passive investment losses."

Coronavirus Relief Bill Includes Tax Benefit for Millionaires That Will Cost Taxpayers $90 Billion | U.S.