More than 100 Democratic lawmakers are urging President Nancy Pelosi of California and Senator Chuck Schumer of New York, the majority leader, to repeal tax relief as part of the economic aid package that Democrats hope to send to President Biden in the coming weeks.
Lawmakers, led by Rep. Lloyd Doggett of Texas and Senator Sheldon Whitehouse of Rhode Island, say the move – and a related change that would effectively raise taxes for some businesses in the years to come – could reduce federal borrowing for the aid program as up to $ 250 billion.
Mr Biden came up with a $ 1.9 trillion plan, all funded by borrowed money. Many Republicans objected to the price tag, saying it is more than the economy needs and will further inflate the federal deficit.
On Monday, 10 Senate Republicans fought back with a $ 618 billion plan. But these Republican lawmakers will almost certainly reject any increase in business taxes as a way to close the gap between the two sides in borrowing for the bill.
The tax cuts in question – which focus on so-called net operating losses – were included in a bailout bill passed by Congress in March 2020, as the pandemic spread and the country was in the middle of a recession. These were temporary cancellations of a limitation imposed on business deductions by the Republicans’ 2017 tax law signed by former President Donald J. Trump. Indeed, the March provision allowed some companies that have suffered heavy losses in recent years to reduce their federal tax bills, applying those losses to offset the income taxes of the previous five years.
Supporters of these tax breaks – including Congressional Republicans and business groups – said the move would provide an injection of cash to struggling businesses amid the pandemic.
In their letter to Ms Pelosi and Mr Schumer, Democratic lawmakers say the cuts “benefit a select set of high-income taxpayers, including hedge funds, real estate developers and possibly the Trump family.”
“The best place to start for Republicans asking for more narrowly targeted relief is to eliminate the $ 250 billion windfall for hedge fund managers and real estate speculators that they had previously built into the CARES Act,” said Mr. Doggett and Mr. Whitehouse said in a written statement. “With 120 Democratic lawmakers, we urge negotiators to end the windfall for the least needy and reinvest in the most needy.”
Lawmakers are proposing to repeal the change, which applied to losses incurred from 2018 to 2020, and make the Trump-era limitation on the carry-back of net operating losses permanent.
Together, these changes would increase federal revenues by about $ 250 billion over a decade, lawmakers said, citing estimates from the Congressional Joint Committee on Taxation. Some of that money would come from the government “clawing back” tax refunds sent to businesses that have already filed their tax returns and used the extended loss provision.