A $60 billion surprise in the Covid relief bill: Tax hikes

“They’ve tucked a trio of little-noticed tax hikes on the wealthy and big corporations into their coronavirus relief package that together are worth $60 billion.


 One takes away deductions for publicly traded companies that pay top employees more than $1 million. Another provision cracks down on how multinational corporations do their taxes. A third targets how owners of unincorporated businesses account for their losses.”  


“[Democrats]  ran into problems complying with the stringent budget rules surrounding so-called reconciliation measures like the coronavirus legislation — especially after some wanted to add provisions like one waiving taxes on unemployment benefits.
If Democrats exceeded their $1.9 trillion budget cap for the plan, they would lose the procedural protections that were used to shield the entire measure from a Republican filibuster in the Senate.  

The tax increases Democrats picked to help keep their plan’s cost in check had the political benefit of being arcane. Unlike things like raising the corporate tax rate or upping the top marginal tax rate on the rich, the ones they chose won’t produce many headlines.

They also fit Democrats’ themes of fighting inequality by forcing the well-to-do to pay more.

Since the provisions were added late in the legislative process, lobbyists didn’t have much time to rouse opposition to the plans.”

“Democrats turned to a rule Republicans created as part of their 2017 tax cuts. It limits to $500,000 the amount of losses certain people who own unincorporated “pass-through” businesses can use to offset other income and thereby reduce their tax bills.

That issue became a lightning rod last year when lawmakers temporarily suspended that limit as part of a previous stimulus package. At the time, lawmakers were trying to get money into the hands of businesses owners in order to prevent layoffs by making it easier for them to qualify for tax refunds, and the $500,000 limit would have impeded that.

Many progressives criticized the move, calling it a giveaway to the rich.

Democrats’ coronavirus plan stops short of undoing last year’s provisions, though it does extend the $500,000 limit — which, like much of the Tax Cuts and Jobs Act, is currently scheduled to expire at the end of 2025 — by an additional year. The Senate Finance Committee says that will raise $31 billion.  

Another provision generates $6 billion by going after executive compensation.

Businesses are normally allowed to deduct employees’ pay on their tax bills, though there are rules limiting those deductions when a CEO and a handful of a company’s other top employees earn more than $1 million. Democrats are doubling the number of officials, to 10, that would be subject to that restriction, which would hit businesses such as investment banks.

A third provision, which budget forecasters say will produce $22 billion, repeals an arcane provision giving multinational companies more flexibility in deciding how to account for their interest expenses when they do their taxes.

To be sure, the tax increases are dwarfed by the amount of tax revenue cut by the legislation — about $590 billion, according to the official Joint Committee on Taxation. Lawmakers are sending another round of stimulus checks to millions of Americans as well as temporarily expanding popular breaks like the Child Tax Credit and the Earned Income Tax Credit.”

https://www.politico.com/news/2021/03/10/covid-relief-bill-tax-hikes-475051

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