Oil Can Harry by Nancy OhanianYesterday, Judd Legum's newsletter, Popular Information, revealed that the top recipient of funds intended for struggling small businesses is multimillionaire Trump donor Monty Bennett. Noting that it's been tough-- and in many cases impossible-- for legitimate small businesses to obtain the congressionally-approved loans from the Paycheck Protection Program, Legum introduced us to someone who hasn't had any problem at all-- CEO of a hotel and resort chain (Ashford and Braenar whose combined revenue last year was $2.2 billion. Is that a small businessman in need of the $96.1 million handout he was given by the Trump regime under the Paycheck Protection Program? (That may be going up to $126 million-- and Bennett isn't even using the money to meet the Paycheck Protection Program objectives of keeping employee paychecks rolling.)
On Thursday, the Treasury Department released new guidelines asserting that it is “unlikely” that any public company “with substantial market value and access to capital markets” qualifies for the loans. Treasury Secretary Steve Mnuchin said there would be “severe consequences” for companies that did not return the money by May 7. But Bennett says his companies will keep the Paycheck Protection Program money.Why is Bennett not concerned about potential consequences? It doesn't hurt that he is a major Trump donor, contributing "$200,000 to the Trump campaign, the Republican National Committee, and a joint fundraising committee supporting both of them since last year." His donations to Trump's 2016 reelection were even larger.In March, Bennett also hired a lobbying firm run by "Jeff Miller, who was a finance vice-chair of President Trump’s 2017 inaugural committee." This cycle, Miller "has raised more than $2.8 million for the RNC and a Trump joint fundraising committee… including $2.5 million in the first quarter of 2020 alone."Bennett, who inherited his business from his father, has been defiant about his thirst for government money despite his enormous personal wealth. "I won’t apologize for being a capitalist in America, or for being reasonably successful at it. But even a capitalist system with companies only and no government backstop does not work," Bennett wrote in a Medium post.
Last month Legum identified dozens of public companies that pay their CEOs $1 million or more and have received Paycheck Protection Program loans. Here are just some of them:It's worth mentioning that Bennett has bribed Republicans both indirectly through the RNC, the NRCC, the NRSC, through contributions to state parties and Republican Party PACs and by moving thousands of dollars into the campaigns of GOP members of Congress, foremost among them Senators Ted Cruz (R-TX), Mike Lee (R-UT), Roy Blunt (R-MO), Rand Paul (R-KY), Ron Johnson (R-WI), Lindsey Graham (R-SC) , Joni Ernst (R-IA), Tom Cotton (R-AR), David Perdue (R-GA), Cory Gardner (R-CO), Dan Sullivan (R-AK), Pat Toomey (R-PA), Richard Burr (R-NC), Marco Rubio (R-FL), John Cornyn (R-TX), and Josh Hawley (R-MO) as well as notoriously crooked House members Pete Sessions (R-TX), Kevin McCarthy (R-CA), Van Taylor (R-TX), Lance Gooden (R-TX)... And and let's not forget Iowa Senator Chuck Grassley (see below).Monday morning, Frank Clemente, Executive Director of Americans for Tax Fairness sent media sources around the country a memo: "Repeal Effort Begins To Revoke Huge Tax Break For Millionaires In Coronavirus Aid Package." Short version: "43,000 Millionaires, Maybe Trump, Get $1.6M Average Windfall This Year, Dwarfing Average American’s $1,200 Check; Billions Wasted As State And Local Governments Struggle."
Leading members of Congress and a broad coalition of advocacy groups under the Americans for Tax Fairness umbrella have launched a campaign to repeal a huge tax break for millionaires included in the $2 trillion COVID aid package passed in late March known as the Coronavirus Aid, Relief, and Economic Security (CARES) Act.The CARES Act was supposed to offer much needed comfort to those suffering most from the pandemic. But hidden in the bill was an obscure provision allowing wealthy owners of noncorporate businesses, especially real estate firms and hedge funds, to leverage losses into big tax savings and refunds.The Joint Committee on Taxation (JCT) estimates the provision will cost the government $135 billion in lost tax revenue over the next 10 years (Title II.C.5), all of it during height of the crisis this year and next. (Due to a “computational error,” JCT’s original cost estimate was nearly $170 billion.) That $135 billion is over three times more than the CARES act spends on safety-net programs ($42 billion), exceeds the amount for hospitals ($100 billion), and nearly matches what will go to state and local governments ($150 billion).This huge loophole will give business owners making over $1 million-- just 43,000 privileged households-- over 80% of the tax break, an average of $1.6 million each. (The JCT told members of Congress that the distribution by income group of the now $135 billion tax cut is the same as it was for the original $170 billion estimate.) By contrast, the CARES Act offers one-time checks of up to only $1,200 to as many as 150 million individuals.Sen. Sheldon Whitehouse (D-RI) and Rep. Lloyd Doggett (D-TX) are lead sponsors of legislation to repeal this offensive tax break. Their bills have attracted 18 cosponsors in the Senate (including six senators who ran for president this cycle) and nearly 40 in the House. Their effort has been endorsed by 177 organizations that continues to grow. The plan is to attach the repeal measure to the next COVID-19 aid package, which is expected to focus on providing federal financial support for state and local government budgets collapsing under the pandemic.How the Tax Break WorksWealthy business owners often have other sources of income, whether a top-dollar salary or hefty investment gains. Meanwhile, their noncorporate “pass-through” businesses (sole proprietorships, partnership, and S corporations) pay no income taxes themselves, but instead pass through profits and losses to the owners, who pay any tax due at individual rates on their personal returns. These “pass-through” owners’ taxable income combines business results with their other income. If the business suffers a loss, it can be subtracted from the owner’s nonbusiness income to lower tax liability.The 2017 Trump-GOP tax law gave noncorporate businesses a big break (a 20% income deduction when figuring taxes due) and partially paid for it by limiting to $500,000 the amount of business losses a couple could use to offset nonbusiness income ($250,000 for an individual). The CARES Act lifts that reasonable cap, so any amount of nonbusiness income (including from salary, the stock or vacation home they may have sold-- no matter how big) can now be erased by business losses-- and there will be plenty of business losses in the coming years.Other tax giveaways in the CARES Act further sweeten the deal. One allows the deduction of the full value of losses-- the 2017 law had limited it to 80%-- and another lets business owners apply losses to earlier years in which taxes were already paid, generating refunds. (These provisions apply to corporations as well, at an estimated 10-year revenue cost of $26 billion.)That “carry back” allowance applies not only to this COVID-ravaged year, but 2018 and 2019 as well, when losses can’t be blamed on a pandemic. And they can be carried back up to five years, to the time before the 2017 tax law cut rates, such that any refund generated now will be based on taxes paid at higher rates (35% for corporations, rather than the current 21%) and therefore be commensurately larger.Likely big winners from these generous new business-loss rules are real estate developers like President Trump and his son-in-law Jared Kushner. That’s because real estate professionals can claim big paper losses even on properties that are actually gaining in value. Trump and Kushner have in the past both used huge claimed losses to dodge millions of dollars in taxes.President Trump’s company, the Trump Organization, is not a single entity but rather a collection of roughly 500 pass-through businesses. Since the Trump family may benefit greatly from the tax handout in the CARES Act, it’s reasonable to speculate whether there was White House pressure to include the provision in the law. ...The $135 billion tax cut doled out to wealthy business owners comes with no strings attached. There is no requirement they pay the money back or use any of it in ways that would help the U.S. recover from the pandemic or the resulting recession. Other aid going to wealthy entities under the CARES Act comes with conditions and oversight. For example, in return for their $60 billion bailout airlines had to agree not to lay off workers, buy back their own stock or pay dividends to shareholders. Businesses receiving aid under the “Paycheck Protection Program” are similarly barred from firing workers.The one public defender of this giveaway has been Senate Finance Committee chairman Chuck Grassley (R-IA) in a Fox News op-ed, in which he made claims and arguments that were easily rebutted. His public championing of the tax break combined with his position of tax-writing leadership strongly indicate “Grassley Giveaway” is an apt nickname for the provision.Where the Money’s Actually Needed: Struggling States and CitiesThe $135 billion wasted on wealthy business owners through this tax break would find ready use by state and local governments struggling with increased public needs, fewer public resources and no ability to borrow to make up the difference.The nation’s governors are seeking $500 billion in immediate relief to fund joint federal-state Medicaid programs, buy more COVID treatment and testing supplies, shore up overwhelmed unemployment systems, and meet other urgent demands. Counties, cities and towns are seeking $250 billion in federal coronavirus aid. Counties alone face a combined COVID budgetary impact of over $140 billion through next year.Republican leaders are resisting calls for another COVID relief bill that would include a lifeline for states and cities. Senate Majority Leader Mitch McConnell has cited the “level of national debt” created by the first rescue bills as a reason to delay more aid and has suggested local governments should declare “bankruptcy” to deal with the economic fallout. Yet he makes no mention of reducing that debt load by repealing the millionaires giveaway in the CARES Act.Repairing the Damage: What Congress Can Do NowThe Senate passed the CARES Act before the cost of the bill-- including the millionaires giveaway-- had been calculated; the House passed it the day after the (initial) budget score was released. The distributional effects of the giveback showing millionaires would receive the lion’s share wasn’t provided until some two weeks later, and then only after a special request.The simplest and best solution would be to revoke the entire provision and use the $135 billion saved to help shore up the collapsing finances of states and cities. Congress has revoked handouts like this in the past. In 1997, a $50 billion giveaway to the tobacco industry was snuck into a tax-cut bill. When it was discovered, Congress swiftly and overwhelmingly voted to revoke it. There are also possible fixes short of full repeal that would lessen the damage.
End of the Line by Nancy OhanianCongress is currently coming up with the next bailout package. McConnell, McCarthy and Mnuchin are hoping to use it to continue making the rich richer. House Democrats should vote for nothing that doesn't include these half dozen points:
• Economic relief for all people impacted for the duration of the crisis, including cancellation of rent and mortgage payments, a moratorium on utility shut-offs for the duration of the pandemic, student debt cancellation and well as $2,000 regular monthly payments.• Essential Workers Bill of Rights.• Medicare-for-All-for-the-Pandemic• State and local aid to fund schools, mental health services, Medicaid, public health departments, firefighters and teachers, health and safety officers, roads and bridges, etc.• Make elections safe and accessible-- including through funding for states to implement universal access to vote by mail, while guaranteeing the continuity of the U.S. Postal Service.• A pause in corporate acquisitions and mergers during the crisis except in cases of bankruptcy. Tie any corporate aid to companies retaining their workforces, avoiding stock buybacks and CEO bonuses, and protecting worker rights. Strengthen oversight, prevent corruption, and ensure loans to small businesses actually go to small businesses, not big franchises or private equity.
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