Tax Provisions in Democrats’ Recipe for a Prolonged Recession
Speaker Pelosi introduced her partisan coronavirus recovery bill, or “Phase 4,” without once consulting with Republicans. In fact, many of its provisions include policies that have been soundly rejected by Republicans in the past. Here’s what’s in the bill.
This bill is a Democratic wish list of tax provisions that undoes years of commonsense reforms.
Providing Millionaires with a Windfall is not a Coronavirus Priority: Democrats are seeking of a repeal of the SALT deduction cap for 2020 and 2021, a tax cut that overwhelming benefits the top 1 percent while allowing states and municipalities to continue brutally taxing families and local businesses. Why are Democrats rushing to reward mainly wealthy homeowners and earners in those states? Raising the SALT deduction is a $10 a year tax cut for the middle class; a $140,000 a year tax cut for the wealthy.
A Bailout for Union Pensions, But Little Relief for Americans with Lost Retirement Savings: Democrats want to spend hundreds of billions of taxpayer dollars to bail out recklessly managed pension funds, also undoing a bipartisan 2014 reform. Yet little in the bill provides flexibility for average Americans who have had to dip into their retirement savings early in order to weather the storm.
No More Paychecks, Just Tax Rebate Checks (That They Complained About): Democrats want another round of rebate checks after loudly complaining about the first. Yet Democrats are opposing allowing people to get back to work so they can receive paychecks—and setting up these rebate checks so they can go to illegal immigrants.
Forces Every Employer—No Matter What—to Provide Paid Leave for Another Full Year, and Leaves Some Employers with an Unfunded Mandate: In order to slow the spread of coronavirus to prevent the crash of our health care system, Congress mandated paid leave as part of the Phase 2 Families First Coronavirus Response Act (FFRCA). It was only supposed to last until the end of December this year and employers are fully reimbursed.
- FFRCA’s paid leave mandate struck a balance.
- It applied to employers with fewer than 500 employees: Larger employers already had paid leave arrangements with employees.
- The mandate was coupled with relief to offset costs: A tax credit of 100% of wages paid.
- Employers with fewer than 50 employees could receive an exemption for undue hardship.
- Democrats are calling to kill that balance.
- Overreach: This bill expands the mandate to ALL employers.
- No Relief: Only provides tax credit reimbursement for employers with less than 500 employees, and removes the small business exemption.
- Too Much Time: Extends and expands the Families First Coronavirus Response Act (FFRCA) paid sick and paid family and medical leave mandate on employers through the end of 2021.
Repeals or Limits Bipartisan Tax Provisions that Provided $150 Billion of Liquidity to Businesses: Democrats want to whipsaw local businesses and undermine the bipartisan CARES Act’s provisions by shrinking the years from which a local businesses can receive a tax refund based on current losses.
- How it works in CARES: When a local store has a good year, they owe more in taxes. When a local store has a bad year, they have losses. The bipartisan CARES Act provided a cushion to these local businesses by allowing them to use those losses against the income in prior years, going back five years. Additionally, individuals with excess business losses in 2018, 2019, and 2020, are also able to “carryback” those losses to the preceding five taxable years. These losses would reduce the taxes owed in those prior years, and the store would receive a refund.
- How Democrats want to change it: Individuals with excess business losses would no longer be able to carry back those losses for a refund that would provide needed liquidity for their business. Additionally, business losses from 2019 may be carried back only one year, and losses from 2020 may be carried back only two years. And companies that sought to boost their employees’ retirement plans need not apply. The reason for doing this? To provide tax break for millionaires. (See section on SALT above.)
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