And here's another one for the hypocrisy file: Those 'significant' checks, small as they are, were held up by Pelosi, according to none other than Bernie Sanders, as a means of getting Joe Biden elected president. Pelosi was the roadblock to these stimulus checks, not letting so much as a penny go out until workers voted for the man she wanted.
Hypocrisy-watch: Nancy Pelosi's 'significant' $600, and $2,500 'crumbs'
How's this for hypocrisy on parade?
With the passage of the $900 billion coronavirus relief spending bill, part of a $2.3 trillion suite for funding the government, everyone knows about the upcoming $600 stimulus checks for America's beleaguered workers. They're welcome enough, but relatively paltry, a mere half of the $1,200 de facto tax credit that was delivered in the bill passed last spring. This $600 is also a tax credit.
House Speaker Nancy Pelosi, though, is busy claiming credit:
BREAKING: #Pelosi says $600 is a "significant" amount for working families.#LetThemEatCake #TrillionForBillionaires pic.twitter.com/PjcIV9W1JX
— Peter Daou (@peterdaou) December 21, 2020
She calls the $600 checks "significant."
And her flying monkeys among the Democrats in Congress are also trying, in talking-point lockstep, to claim credit, too. Here's what Rep. Susan Davis, my own representative in the House from San Diego, blast-emailed to her constituents this morning, emphasis mine:
The bipartisan agreement on emergency coronavirus relief includes many important provisions Democrats fought hard to secure.
The package:
Accelerates Vaccine Distribution to Crush the Coronavirus: Democrats secured billions in urgently needed funds to accelerate the free and equitable distribution of safe vaccines to as many Americans as possible as soon as possible. This funding also helps implement a strong national testing and tracing strategy with billions reserved specifically for combating the disparities facing communities of color and to support our heroic health care workers and providers.
Provides Direct Payments, Rent, Food, and Unemployment Money for the American People: Democrats secured another round of direct payments worth up to $600 per adult or child, averted the sudden expiration of Unemployment Insurance benefits for millions and added a $300 per week UI enhancement for Americans out of work, and lengthened the number of weeks an unemployed worker can receive benefits by 11 weeks. Direct payments could be available as soon as next week and will be sent to all Americans who received a payment earlier this year. Additionally, the bill includes critically needed emergency rental assistance, extends the federal eviction moratorium, provides a 15 percent increase to SNAP, and boosts child nutrition benefits to help relieve the historic hunger crisis that has left up to 17 million children food insecure.
Delivers Key Tax Benefits for Struggling Families: Democrats won improvements to the Earned Income Tax Credit and the Child Tax Credit that help ensure that families who faced unemployment or reduced wages during the pandemic are able to receive a strong tax credit based on their 2019 income, preserving these vital income supports for vulnerable families. To support workers, the agreement extends and improves the Employee Retention Tax Credit to help keep workers in their jobs during coronavirus closures or reduced revenue and also provides a tax credit to support employers offering paid sick leave, based on the Families First framework.
Provides Strong Support for Small Businesses: Democrats secured critical funding and policy changes to help small businesses, including minority, women, and veteran owned small businesses. The agreement includes over $284 billion for first and second forgivable PPP loans, dedicates set-asides for very small businesses and lending through community-based lenders like CDFIs and MDIs, key modifications to PPP to serve the smallest businesses and struggling non-profits and better assist independent restaurants, $15 billion in dedicated funding for live venues, independent movie theaters, and cultural institutions and $20 billion for targeted EIDL Grants which are critical to many smaller businesses on Main Street. Additionally, businesses that received PPP loans will be able to take tax deductions for the expenses covered by forgiven loans, saving businesses about $200 billion.
Funds Education, Child Care, and Students: The agreement provides $82 billion in funding for colleges and schools, including support for HVAC repair and replacement to mitigate virus transmission and reopen classrooms, and $10 billion for child care assistance to help get parents back to work and keep child care providers open. The package includes the largest expansion of Pell Grant recipients in over a decade, reaching 500,000 new recipients and ensuring more than 1.5 million students will now receive the maximum benefit.
Delivers More Affordable Broadband Access: The agreement invests $7 billion to increase access to broadband, including a new Emergency Broadband Benefit to help millions of students, families and unemployed workers afford the broadband they need during the pandemic.
Secures Key Funding Streams for State and Local Governments: While state and local governments need much more funding to prevent the senseless layoffs of heroic essential workers and critical service cuts, Democrats won new targeted funds for state and local government functions that will help alleviate their overall budget burdens. These targeted funds include the emergency resources for schools, $27 billion for state highways, struggling transit agencies, Amtrak and airports, $22 billion for the health-related expenses of state, local, tribal and territorial government and an additional year of eligibility for expenses under the CARES Coronavirus Relief Fund.
Creates Good-Paying Jobs in Clean Energy and Infrastructure to Fight the Climate Crisis: The agreement includes sweeping clean energy reforms, R&D enhancements, efficiency incentives, extends clean energy tax credits and includes the bipartisan Water Resources Development Act of 2020, creating more good-paying jobs strengthening and improving the vital water infrastructure that Americans rely on. The package also phases out superpollutant HFCs, positioning the U.S. to lead the world in avoiding up to 0.5 degree Celsius of global warming.
Ends Surprise Billing: Patients deserve the peace of mind to know that, whether in an emergency or a planned in-network procedure, they will not be hit with crushing, surprise medical bills for out-of-network treatment beyond their control. The agreement includes bipartisan legislation that will end surprise bills for emergency and scheduled care, so patients are only responsible for their usual cost-sharing amounts and deductibles. With patients protected, the legislation establishes a fair process for health care providers and health plans to sort out the out-of-network costs between themselves, without the patient stuck in the middle.
Supports the Global Fight Against COVID: Democrats secured an additional $3.36 billion for a total of $4 billion for GAVI, the international vaccine alliance, recognizing that we are not truly safe until the whole world is safe from the coronavirus.
For a bill that Davis insisted was super-bipartisan, there sure wasn't a lot of Republican involvement, based on what she wrote in her email. Odds are good that Davis's credit-hogging was done at the behest of Pelosi, given that Democrats often move in lockstep.
But it's weird stuff. Way back in March, when the double-size stimulus checks were approved in Congress, Pelosi called the government cash payments a mere "mitigation." Now they're "significant."
And here's another one for the hypocrisy file: Those 'significant' checks, small as they are, were held up by Pelosi, according to none other than Bernie Sanders, as a means of getting Joe Biden elected president. Pelosi was the roadblock to these stimulus checks, not letting so much as a penny go out until workers voted for the man she wanted.
Yet here's where it gets downright 'blech.':
The stimulus checks are being written out and paid because state and local governments have shut down so much of the economy, throwing millions out of work. It doesn't matter that the virus statistics seem to be lumped in with seasonal flu deaths, or that COVID-19 has a 95% to 99% cure rate, or that a vaccine has been produced, or that even the World Health Organization has found that asymptomatic transmission is extremely rare. All of these factors argue against lockdowns and lost jobs. But the useless lockdowns done by Democrats are continuing, artificially shutting down large parts of the economy.
And Pelosi's response is the $600 check, which she calls "significant."
Compare and contrast to a non-relief check that workers were finding in their paychecks as a result of the Trump tax cuts of 2018.
There, workers found $1,000 to $2,500 additions to their paychecks as a direct result of Trump's tax cuts. Like the stimulus payments, it was directly related to the tax code, but instead of a wait-for-it-to-arrive check for the tax credit, the middleman was cut out. Some $30 billion ended up in worker pockets with those Trump tax cuts. Workers gained.
Pelosi's response? She called that "crumbs."
So let's get this straight: Money from the government coffers that you have to wait for is "significant." Money you earn yourself is "crumbs."
No wonder a majority of Americans, according to a poll out today, don't want Pelosi anywhere near the levers of power. She will go Orwell on you and tell you you're supposed to be excited.
THE REALITY: WE KNOW WHO OUR GOVERNMENT WORKS FOR AND THEY LIVE ON WALL STREET!
Even in the “relief” bill itself, more money goes to business interests than to workers, including $284 billion in loans for the misnamed Paycheck Protection Program (a slush fund for corporations masquerading as small businesses), $20 billion in emergency grants to businesses, $15 billion for the airline industry and $15 billion for the movie theater chains. There is even a provision expanding the tax deduction for the “three-martini lunches” enjoyed by corporate executives.
As the oligarchs make trillions, Congress offers a pittance for the jobless
The most important fact about the $900 billion coronavirus relief bill that was adopted by the US Congress Monday night is that it is grossly inadequate to meet the vast social needs exposed by the pandemic. Once again, the corporate-controlled two-party political system has revealed its indifference to mass suffering.
Millions of workers thrown out of their jobs by the coronavirus pandemic last spring were cut off federal supplemental unemployment benefits of $600 a week on July 31, under provisions of the CARES Act adopted near-unanimously by Democrats and Republicans in Congress. This cutoff was carried out to enforce the back-to-work drive by big business, which demanded that workers return to their jobs producing profits for the capitalists, regardless of the COVID-19 threat to their health and lives.
While workers were forced back to factories and workplaces, there are 10 million fewer jobs today than at the start of the year. Now, after nearly five months of no benefits, which have wiped out their savings, driven them into poverty and put many in danger of homelessness, longterm unemployed workers will receive $300 a week, limited to 11 weeks, expiring by the middle of March. This pitiful sum will barely keep food on the table, let alone pay the bills that have accumulated since the summer.
Added to that is the $600-per-person one-time check to be sent out to most working people, as well as their children—half the $1,200 checks that were issued by the Treasury last spring and less than the average rent in most American cities. The sum total of these checks, $166 billion, is less than the $190 billion that Amazon CEO Jeff Bezos and Tesla CEO Elon Musk have gained between them since March.
Two billionaires have added more to their personal wealth than the US government sees fit to pay out to all working people in the country, combined, in the midst of the greatest economic crisis since the Great Depression. What a demonstration of the fact that America is a dictatorship of, by and for the billionaires! And to this class reality must be added the fact that Bezos and Musk have enriched themselves from a social catastrophe, a pandemic that has killed 320,000 Americans and 1.7 million people around the world.
The Democrats and Republicans agreed on a $900 billion limit to the “relief” bill. This figure is less than the $1 trillion accumulated by America’s billionaires since March. And it is less than the nearly $1 trillion the federal government is spending on the military and nuclear weaponry, including a record $741 billion budget for the Pentagon alone, passed through Congress by huge margins in both parties.
Compare the colossal sums available to the superrich and the military to the penny-pinching treatment of jobless workers. Two pandemic-related unemployment benefits programs, scheduled to expire next Monday, will now be extended for a mere 11 weeks. The moratorium on evictions, established as a public health measure by the Centers for Disease Control and Prevention, will be extended for a month. A pitiful $25 billion is assigned to the relief of renters and homeowners facing foreclosure—another drop in the bucket.
The Democrats and Republicans in Congress have aimed not to save the lives or livelihoods of American working people, but to safeguard the vast fortunes of the financial aristocracy. The coronavirus relief bill seeks to stave off, for a month or so, an economic collapse that would trigger a massive social upheaval and threaten the existence of the capitalist system as a whole.
It is notable that in her remarks Monday introducing the legislation, House Speaker Nancy Pelosi cited the deadline of December 26 for the expiration of pandemic-related unemployment assistance, calling that “vital.” Politicians of both capitalist parties were concerned that such a cutoff for 12 million people the day after Christmas would trigger widespread outrage in the working class.
The Republicans took their stand on blocking any financial aid for city and state governments that have been devastated by the economic slump accompanying the pandemic and have already eliminated 1.3 million jobs of public employees. Caught in the vise between legal requirements that they balance their budgets and plunging revenues, virtually every major city and most states project even more massive job cuts unless there is emergency federal aid. Democrats abandoned a proposed $1 trillion for the cities and states in favor of minimal aid for schools and public health services.
However sharp their tactical and short-term differences—large numbers of congressional Republicans still refuse to acknowledge the election victory of President-elect Joe Biden—both parties share a common class loyalty. They uphold the interests of the financial oligarchy, for which the coronavirus pandemic has been a money-making opportunity, not a historic calamity.
This was demonstrated in one critical incident in the weekend drive to put together a final version of the relief bill. When Republican Senator Pat Toomey proposed an amendment that would bar the Federal Reserve from reviving lending operations to companies and government agencies authorized under the CARES Act but phased out by the Trump administration, the Democrats rose up in rebellion.
They would not fight for the unemployed, the destitute or those facing eviction and foreclosure. They could care less about the 320,000 dead from COVID-19, or the 400,000 more facing death before widespread vaccinations take place. But when it came to a threat to slow the flow of credit and subsidies to big business, every Senate Democrat rushed to the barricades. Toomey’s proposal was sidetracked, and the Fed’s lending powers remained unimpaired.
Even in the “relief” bill itself, more money goes to business interests than to workers, including $284 billion in loans for the misnamed Paycheck Protection Program (a slush fund for corporations masquerading as small businesses), $20 billion in emergency grants to businesses, $15 billion for the airline industry and $15 billion for the movie theater chains. There is even a provision expanding the tax deduction for the “three-martini lunches” enjoyed by corporate executives.
The New York Times, the main media voice of the Democratic Party, praised the bipartisan congressional bill, headlining its editorial, “This Deal Is Good Enough.” The Democrats and their media mouthpieces portray the bill as a temporary stopgap until the Biden administration takes office January 20, 2021. But Biden has no plans to alleviate the social conditions of masses of workers facing hunger, poverty, homelessness, disease and death in a winter that is likely to be the worst in living memory. He has flatly rejected a lockdown of nonessential businesses and the closure of schools, the only measures that can prevent a tidal wave of death before vaccinations are widely available to the American population.
Working people should not place their hopes in any section of the corporate elite, including the Democratic Party and the Biden administration. The only force that will defend workers’ interests is the working class itself, organized as an independent political movement, fighting to enforce the closure of nonessential workplaces, with full income protection for affected workers and small businesses, until the pandemic is under control, and prepare a nationwide political general strike on the basis of a revolutionary socialist program.
Now, let me take you through the provisions, only one of which — the break for the Trumps, the Kushners and their ilk — has attracted meaningful public attention.
Now, let me take you through the provisions, only one of which — the break for the Trumps, the Kushners and their ilk — has attracted meaningful public attention.
Newly released wage data documents 40-year wealth redistribution to top 0.1 percent
Earlier this month the Economic Policy Institute (EPI) published newly available wage data documenting the continued rise in wage inequality. Social Security Administration data collected by the EPI presents the cumulative change in wages and the upward shift of wage income in favor of the wealthiest social layers since 1979.
The results, adjusted for inflation, demonstrate the relentless shift in income over the last four decades from the bottom 90 percent of wage earners to the advantage of the top 10 percent and in particular the top 1 percent and top 0.1 percent, whose total wage income has risen 2.6 times and 4.5 times respectively.
These figures, striking as they are, do not capture nearly the full extent of the rise in social inequality. While they include such things as realized stock options and vested stock awards, they do not include the value of the vast stock portfolios held, for the most part exclusively by wealthy upper income social layers. Due to the pumping of trillions of dollars into the stock market by the federal government, including the infusion of vast amounts under the CARES Act, the net worth of billionaires such as Amazon’s Jeff Bezos and Tesla’s Elon Musk has soared to astronomical levels.
Excluding the rise in value of stock holdings, the income of the top 0.1 percent of wage earners has increased a staggering 345.2 percent since 1979 and the next 1 percent saw an increase of 160.3 percent. Meanwhile the bottom 90 percent saw a 26 percent increase in real wages. Even though the next 10 percent, the more privileged layers of the middle class saw pay increases of 51–75 percent.
Even the 26 percent rise in wage income for the bottom 90 percent is probably overstated, since this figure is based on total hours worked, including overtime, and not average base pay. Much of the rise without a doubt reflects the fact that workers are laboring for longer hours, often at multiple jobs, to keep their heads above water.
The numbers also do not reflect the impact of the destruction of benefits, hitting lower-wage workers the hardest. Over this time period, many have lost their employer-paid health benefits or have faced rising co-payments. Employer paid pensions are also a thing of the past, as well as paid sick leave. The younger generation is being crushed by massive student loan debt.
Taking all this into account in real dollar terms, those in the bottom 90 percent, the majority of whom are working class and less privileged layers of the middle class, have seen an average increase in wage income of less than $9,000 since 1979.
Meanwhile, annual wages between 1979 and 2019 more than doubled for the upper 1 percent, on average from $251,600 to $522,000 and for the top 0.1 percent $648,700 to $2.89 million. By contrast, if income growth had been distributed equally across the population, the average wage earner would have enjoyed a $57,535 annual pay increase since 1979. Based on a standard 40-hour workweek, this would mean an average wage increase of well over $25 an hour.
These figures shed light on the pathetic promotion by the unions and sections of the Democratic Party of a $15 per hour “living wage.” Based on a 40-hour workweek, $15 an hour would leave the typical worker at the level of 1979, without so much as an extra dollar in his pocket. What happens then to the other $57,535? It stays in the bank accounts of the rich.
Illuminating further the unions’ phony “Fight For $15” campaign, a recent report in Bloomberg News notes that, according to government statistics, in communities where logistic giant Amazon opens a warehouse paying its much hyped $15 an hour wage, overall pay for warehouse workers suffers a decline. According to Bloomberg, due to the company’s economic power, “In 68 counties where Amazon has opened one of its largest facilities, average industry compensation slips by more than 6% during the facility’s first two years, according to data from the Bureau of Labor Statistics.”
The EPI report shows that during the 2008 recession and the recovery that followed, the upward redistribution of income continued. While the bottom 90 percent saw a miniscule wage growth of 8.7 percent, reflecting both longer hours worked as well as wage increases, this was dwarfed by the rise in the top income categories. The wages of the top 1.0 percent and top 0.1 percent grew 20.4 percent and 30.3 percent respectively over the same 10 years.
The report also looks at the percentage share in national wage income by segment of the population from 1979 to 2019. The top 1 percent increased its share by 6.7 percent during that period, while the bottom 90 percent saw a decrease of 8 percent in its share of total wage income.
In another related study the EPI reported that in 2019 alone executive pay rose a hefty 14 percent at the top 315 US companies, reaching $21.3 million on average. The same report documented that from 1978 to 2019, CEO compensation grew by a staggering 1,167 percent.
The rise in income inequality has been a relentless trend over the past four decades and has continued under Democratic and Republican administrations alike. Indeed, the administration of Barack Obama (2009–17) saw the greatest upward redistribution of wealth from the working class to the wealthy in history until now.
The choice of 1979 by the EPI to begin its wage study is not arbitrary. It coincides with the launching of an assault by the American ruling class on the gains won by workers during the post-WWII economic boom under conditions where US capitalism’s global hegemony was coming under increasing threat from its rivals in Europe and Asia.
This assault began under the Democratic administration of Jimmy Carter, who appointed Paul Volcker as Federal Reserve Chairman in August 1979 to drive up interest rates in order to increase unemployment, forcing companies like Chrysler into near bankruptcy.
The assault accelerated under the Reagan administration, which fired and blacklisted 12,000 striking air traffic controllers in 1981. The AFL-CIO supported the attacks on the workers, blocking any solidarity action and isolating the air traffic controllers and other sections of workers. In the following years unionbusting, wage cutting and plant closures spread to auto, steel, mining, transportation and telecommunication.
In looking at the EPI figures on wages, it is important to understand that the undermining of the social position of the working class was not simply the result of abstract economic processes or government policies alone. At every step, the procapitalist and nationalist trade unions assisted the attack on workers’ living standards in the name of promoting global competitiveness of US big business, accepting multitier wages, the growth of casual and part-time work, elimination of pensions and other benefits. At the same time the unions forged ever-closer ties with management and the state.
The rise in social inequality coincided with the growth of financialization in the 1980s, the reaping of fortunes based speculation and parasitism, not the expansion of production. This is reflected in the EPI tables, which shows an actual decline in real wages in the early 1980s while wages for the top income group began to rise precipitously. Overall, between 1980 and 1990, the real wages of the top 0.1 percent rose a staggering $789,685, while the wages of the bottom 90 percent remained virtually unchanged.
The EPI report does not include data from 2020, which saw a further massive transfer of wealth to the rich through the passage of the CARES Act in response to the COVID-19 pandemic. America’s 650 billionaires, including the pandemic profiteers, Bezos, Musk and Tyson, have increased their wealth by $1 trillion. At the same time the broad masses of workers have seen a devastating drop in income and face levels of hunger, mass evictions and economic distress not seen since the Great Depression of the 1930s.
The pandemic has intensified the already existing class tensions to unprecedented levels. The growth of inequality and the maniacal focus of the ruling class on protecting its wealth at all costs has made any rational solution to the spread of the pandemic impossible. Instead, the ruling class has adopted the homicidal policy of “herd immunity,” seeking to continue the process of profit accumulation no matter the cost in human lives.
This will provoke revolutionary struggles in the United States and across the world. The socialist reorganization of society, including the expropriation of the vast private fortunes of the corporate and financial oligarchy and a radical redistribution of wealth, has become a life-and-death necessity for billions of people across the plant.
The CARES Act Sent You a $1,200 Check but Gave Millionaires and Billionaires Far More
The stimulus checks were meant to get average Americans through the lockdown, but those $1,200 payouts were small change compared with the billions in tax breaks the CARES Act handed out to the country’s wealthiest.
by Allan Sloan June 8, 5 a.m. EDT
President Donald Trump hands pens to Treasury Secretary Steven Mnuchin, left, and Senate Majority Leader Mitch McConnell, center, after signing the CARES Act on March 27. (Jim Watson/AFP via Getty Images)
Do you want to see how legislation that was supposed to be a bailout for our economy ended up committing almost as much taxpayer money to help a relative handful of the non-needy as it spent to help tens of millions of people in need? Then let’s step back and revisit parts of the Coronavirus Aid, Relief and Economic Security Act and look at some of the numbers involved.
The best-known feature of the CARES Act, as it’s known, is the cash grant of up to $1,200 per adult and $500 per child for households whose income was less than $99,000 for single taxpayers and $198,000 for couples. These grants are nontaxable, which makes them even more valuable. Some 159 million stimulus payments have gone out, according to the IRS.
The income limits suggested that the plan benefits the people most in need, those most likely to spend their stimulus payments and thus help the economy. The rhetoric conveyed the same: “The CARES Act Provides Assistance to Workers And Their Families” is how the Treasury’s website puts it. There were no grants to more-fortunate people, who for the most part aren’t in financial distress and are less likely than the less-fortunate to spend any money that Uncle Sam sent them.
But when I began looking at details of the legislation, I realized that several of its provisions quietly provided benefits that were worth much more than $1,200 to some upper-middle-class people who didn’t qualify for stimulus payments. Some other provisions provided vastly bigger benefits to the rich, to corporations and to a relative handful of ultra-rich folks.
So let me show you five provisions of the legislation that benefited the upper middle class (including yours truly); the families of Donald Trump and his son-in-law, Jared Kushner; high-income people who make large charitable donations; and Boeing and other corporations that are showing losses; as well as indirectly benefited people who have substantial investments in U.S. stocks.
These five provisions that help the well-heeled will cost the Treasury — which is to say, U.S. taxpayers — an estimated $257.95 billion for the 2020 calendar year. That’s nearly as much as the estimated $292.37 billion price tag for the stimulus grants to regular folks. The numbers are from Congress’ Joint Committee on Taxation, the official scorekeeper of the financial impact that legislation has on the Treasury. (I used those figures to calculate the spending for the 2020 calendar year rather than for 10 federal fiscal years because I’m interested in today’s impact, not the projected long-term impact.)
I’m writing this now, more than two months after the CARES Act took effect, as a cautionary tale. That’s because with massive unemployment upon us and the fall elections drawing near, there’s a temptation for Congress and Trump to produce legislation that will help needy people a bit but help the non-needy a lot more by doing things like reducing capital gains taxes.
Now, let me take you through the provisions, only one of which — the break for the Trumps, the Kushners and their ilk — has attracted meaningful public attention.
Eliminating Required Distributions From Retirement Accounts: $11.72 billion
People ages 72 and up who have IRAs or 401(k)s or other “defined contribution” retirement accounts must take federally taxable required minimum distributions from them every year. (Some states also tax these distributions.) People who inherit such accounts are also required to take annual distributions, regardless of their age.
The required distribution amount is based on year-end age and account balances. For example, if you were 75 at year-end — as I was — your RMD for this year is 4.37% of your year-end 2019 retirement account balances. If you were 76, it’s 4.55%.
But this year, thanks to the CARES Act, I don’t have to take any retirement distributions at all.
Not having to take distributions matters a lot to some people. For instance, if I took my full RMD this year, which I don’t plan to do, it would be one of my larger income sources. And I would have to pay federal and state income tax on it, regardless of whether I spent the money or saved it.
I’d like to tell you how many people the JCT expects to benefit from this year’s RMD waiver; how much their distributions would have totaled and what the tax rate on them would have been; and how many people the JCT expects to take distributions this year even though they’re not required to take them. Alas, the JCT doesn’t disclose this information and declined to share it with me.
But even though I don’t have specific numbers, it’s clear that most of the benefit from this year’s RMD waiver goes to well-off people. Why? Because people who need retirement account money to live on are going to take distributions, and people who don’t need the money are unlikely to take distributions.
The reason for the no-RMD provision is that the stock market was sinking rapidly in March, when the CARES Act was being discussed. The Standard & Poor’s 500 Index, for example, fell by 30.8% from the end of 2019 through its low for 2020 (at least so far) on March 23, a few days before Trump signed the CARES Act legislation. Congress didn’t want to penalize retirees by forcing them to sell stock during a market crash.
So if someone with a 4.37% required distribution had money in an S&P 500 index fund, our investor would have had to withdraw 6.32% of the fund’s balance (4.37 divided by 69.2) rather than 4.37% of it if the investor took the distribution on March 23. That would have hurt our investor’s future financial security.
If the market fell by 50% through year-end, which in the scary days of March seemed to be a distinct possibility and could still happen, our theoretical investor would have to cash out 8.74% of the account if RMDs were still required.
There were other ways to deal with this problem, such as letting people take a pass on their first $15,000 of RMDs, rather than giving a big break to the likes of me and a far bigger break to people with far larger retirement accounts than mine. But Congress and Trump didn’t do that.
Charitable Deductions: $4.83 billion
Normally, people who itemize deductions on their federal tax return can deduct no more than 60% of their adjusted gross income for charitable contributions. But for this year, the limit is 100% of AGI.
The Tax Policy Center, whose research helped inform this article, estimates that about two-thirds of the people who donated more than 60% of their AGI in past years had incomes of less than $100,000. But although such people accounted for the bulk of those making such large contributions relative to their income, the TPC says, “Most of the value of the deduction goes to just a small number of the very wealthy.”
The theory behind raising the limit this year is that it will encourage people to make larger donations than they otherwise would. But I can’t imagine how this provision — like the provision allowing people who take the standard deduction to subtract $300 from their taxable income for charitable contributions — is going to significantly increase donations to charities trying to help people cope with COVID-19.
The $4.83 billion JCT number for this provision’s cost to the Treasury includes tax savings for both individuals and corporations.
Pass-Through Entities: $140.61 billion
Now, we come to the huge item that benefits the likes of Trump and Kushner, their families, other wealthy real estate types, hedge fund investors and all sorts of ultra-high-income people, who derive large amounts of money from partnerships, LLCs and other so-called pass-through entities.
As you’ll see in a bit, this big-time break provides a big-time benefit to a relative handful of people.
Now that it’s a fait accompli, this provision is belatedly getting a lot of media attention. So I’ll spare you most of the details about how it allows the ultra-wealthy to use paper losses to offset income that was taxed in previous years, when tax rates were higher than they are now, and get refunds based on those old, higher rates.
Suffice it to say that the JCT estimates that about 82% of these benefits — let’s call it $115 billion — will go to about 43,000 taxpayers with $1 million or more in annual income. That’s an average of about $2.68 million each.
The new proposed stimulus package passed by the Democratic-controlled House of Representatives — the HEROES (for Health and Economic Recovery Omnibus Emergency Solutions) Act — would repeal this provision. However, its prospects for passage in the Senate, where Majority Leader Mitch McConnell, R-Ky., has called the HEROES Act a “totally unserious effort,” seem remote. He and other Senate Republicans insisted on making the break for pass-through entities part of the CARES legislation. It’s hard to imagine them allowing any new bailout legislation to reverse that benefit. I’m sure Democrats realized this but wanted to go on record as opposing the pass-through break.
The HEROES Act would also repeal the $10,000 limit on deductions for state and local income and real estate taxes, which Republicans included in the 2017 tax cut legislation to reduce the cost to the Treasury of the big cuts they gave to corporations and ultra-high-income people. (Not coincidentally, the cap hurt people in high-income, high-tax blue states.) It’s hard to imagine this provision becoming law, either.
Now, let’s look at two corporate tax breaks inserted in the CARES Act. One lets corporations increase their interest deductions; the second lets them use tax losses from 2018, 2019 and this year to get immediate, substantial refunds rather than having to wait until they show future profits that offset those losses.
The people who benefit most from these corporate tax breaks, of course, are the corporations’ owners. (Workers, in theory, benefit to some extent, as well.)
By increasing companies’ cash flows and reported earnings, these breaks help the share prices of corporations whose stock is publicly traded and help increase the value of privately held corporations.
Stock ownership by individuals is concentrated among higher-income people.
Corporate Interest Deductions: $12.09 billion
One of the reforms of the 2017 tax act was reducing the amount of interest that corporations could deduct on their federal tax returns. The idea was to reduce the attractiveness of debt, which is subsidized by taxpayers and carries big risks to corporate owners as well as employees. (For examples, see the recent bankruptcies of Neiman Marcus and J. Crew, which were burdened with debt, part of it incurred to pay fees and distributions to the buyout firms that had taken them over.)
The CARES Act undid part of the 2017 act by increasing the deductible level to 50% of earnings before interest, taxes, depreciation and amortization from the previous 30%.
Like some of the other provisions that we’ve looked at, this doesn’t involve a lot of money relative to the numbers that we’re dealing with. But it’s symbolic. And the people benefiting the most from it because they have major investments in stocks aren’t likely to be worrying about how to pay for food or avoid losing their homes.
Corporate Loss Treatment: $88.70 billion
This does the same kind of thing for corporations that the pass-through provision we discussed earlier does for LLCs and partnerships and such. But it hasn’t attracted anything like the same attention that the pass-through giveaway has gotten because it doesn’t involve names like Trump and Kushner.
Until now, corporations that had losses last year and this year could carry them forward to offset taxes for future years, but they couldn’t apply them to get refunds of taxes paid in previous years.
Corporations can now apply losses from this year, last year and 2018 to income from the previous five years. That’s going to be a big deal for companies — can you say Boeing? — that are likely to show losses.
What’s more, these companies can get refunds of up to 35% of the losses they carry back to 2017 and earlier years, even though the corporate tax rate is now only 21%. The rationale is that because the corporate tax rate was 35% before 2018, companies should be able to get refunds today based on what they paid then, not on what they’d be paying now.
So this pays off on multiple levels: The beneficiaries not only benefit today from current and recent losses rather than having to wait until they have profits in the future, but they get a much bigger bang for the buck.
Our country is suffering through major, major problems. We’ve got more than 100,000 people dead from COVID-19, unemployment levels not seen since the Great Depression, and protests and civil unrest in cities and towns across the country. We’re appropriately adding trillions of dollars to our national debt to try to forestall an economic meltdown. Let’s just hope that further federal aid goes to those who really need it. And doesn’t go to those who don’t.
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