A 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.
In 2017, when Republicans passed their new tax plan, they put a limit on business losses people can use to reduce the amount they owe in taxes. The provision was necessary to keep its official “score” within the range the party needed to use a 50-vote process in the Senate, bypassing Democratic opposition. Now that the tax plan is law, Republicans used the Covid-19 relief package to obliterate those limits.
Eighty-two percent of the benefits of the new tax break will go to real estate and hedge fund investors, and people making $1 million or more a year, the Washington Post reported, citing an analysis by the Joint Committee on Taxation that was requested by Democratic Sen. Sheldon Whitehouse of Rhode Island and Rep. Lloyd Doggett of Texas. The estimated 43,000 people who will benefit from the provision will each see their tax liability fall by an average of $1.7 million this year — costing the government more than $90 billion, according to the estimate. That tax break is more than 1,400 times larger than the $1,200 stimulus check the federal government issued to individuals with incomes up to $99,000.
Democrats on the Finance Committee tried to strike the measure, which appeared in earlier Republican versions of the bill introduced by Senate Majority Leader Mitch McConnell and were deliberated in the week before its final passage, according to spokespeople for two Democratic Senate Finance Committee members. Democrats eliminated some provisions, according to a spokesperson for ranking member Ron Wyden of Oregon, but failed to strike the millionaire tax break.
“This was a Republican provision that had been included in their bill from the beginning,” said Ashley Schapitl, spokesperson for Senate Finance Democrats. “If you recall, McConnell put out the Republican-only bill the day or two before those weekend negotiations began (March 20) and this was in there. We were able to knock a few of these things out of the final bill like the transition tax overpayments and downward attribution.”
The $2 trillion Coronavirus Aid, Relief, and Economic Security, or CARES, Act passed by a unanimous vote in the Senate. At least one Finance Committee Democrat — Whitehouse — was unaware that the tax breaks were included in the final bill text, which was set less than an hour before the vote, according to his spokesperson Richard Davidson. “Further, he only learned of the skewed distribution of the tax cuts after requesting an analysis.”
The bill then went to the House, where it passed by an unrecorded voice vote on March 27 with many members — including some in leadership — either unaware that the tax break provision even existed, or unwilling to raise it publicly. The lack of public debate over the extent to which the stimulus was crafted to benefit the rich at the expense of the poor further underscores how scandalous it is that there is no official record of the vote. According to The Intercept’s effort to reconstruct a roll call to record how each member voted, Rep. Alexandria Ocasio-Cortez is the only Democrat who has so far said she would have voted against the bill.
Asked if House Speaker Nancy Pelosi knew about the provision allowing for the millionaire tax break before voting on the bill, spokesperson Henry Connelly did not provide an answer, but said Republicans snuck in the provision as a tax giveaway to a small number of wealthy people.
“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,” Connelly said in a statement.
A spokesperson for Massachusetts Democratic Rep. Ayanna Pressley, a member of the House committees on financial services and oversight, said Republican Senate staffers added the provision at the last second to the final bill text, and that relevant leadership and committee staff did not have a heads-up.
California Rep. Ro Khanna, a member of the House committees on oversight and budget, said he found out about the provision after seeing reporting from the Washington Post. “Our office just learned about this when it was reported, it was a surprise to see,” said Heather Purcell, spokesperson for Khanna.
“These loopholes alone could cost over $170 billion. That’s more than we gave hospitals the CARES Act. The next relief package should work for the people who need it the most, not for the 1%,” Khanna tweeted Wednesday, following The Intercept’s inquiry.
Two other Democratic members who declined to comment on the record said they were not aware of the provision before voting, and learned of it after reporting and requests for information from the Joint Committee on Taxation.
Doggett, who sits on the House Ways and Means Committee, along with Whitehouse, sent a request to the White House seeking information on the origin of the provisions, citing reporting that shows that the tax break will potentially benefit the president himself, Jared Kushner, and “real estate investors in President Trump’s inner circle.”
“As both small businesses and workers were running out of options, Republicans insisted on this tax break for those at the very top,” Doggett said in a statement to The Intercept. “Only after the Senate had approved the CARES Act was the cost of this provision revealed—more care to this narrow slice of the top 1% than for hospitals or state and local governments. Now that we have laid bare the cost and just how few it cares for, it must be repealed.”
Whitehouse is also calling for its repeal. “It’s a scandal for Republicans to loot American taxpayers in the midst of an economic and human tragedy,” Whitehouse told the Post. “Congress should repeal this rotten, un-American giveaway and use the revenue to help workers battling through this crisis.”
The stimulus was passed without some critical enforcement mechanisms, and President Donald Trump has already fired the inspector general set to oversee the distribution of the relief package’s funds, setting his sights on a White House lawyer to take over instead. While the stimulus calls for a five-person panel to oversee disbursement of the relief funds, Congress was slow to populate the committee. Until Friday, when party leaders named three committee members, Bharat Ramamurti, a former staffer to Sen. Elizabeth Warren, was the lone official on the committee. Earlier in the week, he took his oversight role to Twitter, where he posted a thread listing questions he’s asking about how the money is being moved. “Please follow along if you’re curious about what’s happening to billions of your dollars and who it might be helping (or not),” Ramamurti wrote.