Tax provision in coronavirus stimulus will mostly benefit wealthy: Study
One tax code change in the coronavirus stimulus law could help rich Americans.
One tax provision in the $2.2 trillion coronavirus stimulus package will overwhelmingly benefit wealthy Americans, according to a nonpartisan congressional analysis.
The measure allows taxpayers to use losses from certain businesses to reduce taxes owed on nonbusiness income, such as profits from investments.
Roughly 80% of the benefits of the provision will go to roughly 43,000 taxpayers who earn more than $1 million a year, according to the analysis conducted by the Joint Committee on Taxation, which was first reported by The Washington Post.
The provision reversed an element of the 2017 GOP tax law that allowed a married couple to use their first $500,000 in losses from businesses formed as pass-throughs -- entities that pass profits to owners and pay taxes through the individual income tax -- to offset taxes on nonbusiness income.
The measure lifted the limit for this year, and allows filers to apply it retroactively for the last two years.
"It's a really big deal for a really small group of wealthy people," Matt Gardner, a senior fellow at the Institute on Taxation and Economic Policy, told ABC News.
While business owners in various industries could benefit from the tax provision, real estate investors -- including President Donald Trump -- could be some of the biggest potential beneficiaries, Gardner said.
Rep. Lloyd Doggett, D-Texas, who, along with Sen. Sheldon Whitehouse, D-R.I., requested the analysis from the Joint Committee on Taxation, accused Republicans of using the "health emergency to reward ultrarich beneficiaries, likely including the Trump family, with a tax loophole not available to middle class families."
Republicans pushed back on Democrats' criticism, and pointed to the 96-0 Senate vote on the overall coronavirus package.
"The CARES Act helps businesses keep the lights on and employees on payroll as much as possible to get through this crisis," a spokesman for Senate Finance Committee Chairman Chuck Grassley said in a statement to ABC News. "Every senator criticizing this provision voted for this bipartisan bill, so their complaints about a law they helped write simply stink of partisan politics."
The Senate Finance Committee majority staff, in a summary of the tax provisions in the law drafted by the panel, said the changes will help companies "provide critical cash flow and liquidity" during the coronavirus outbreak and economic crisis.
"There are a whole bunch of businesses that will really be devastated in 2020, and the ability to take them back and use them as a deduction against earlier years is very favorable," Steve Rosenthal, a senior fellow at the Tax Policy Center, told ABC News.
When asked about the potential beneficiaries of the law change, Rosenthal added, "I did not think Donald Trump. I thought that they are rolling back these loss limitations in a time of economic crisis."
He also said the rewrite was expected to the 2017 GOP tax law provision that "complicated" the tax code.
"I think Congress just realized that they made a mistake in 2017, and included some provisions that were really poor policy," he said.