More than 80% of the benefits of a tax change tucked into the coronavirus relief package passed by Congress last month will go to those who earn more than $1 million annually, according to a report by a nonpartisan congressional body expected to be released on Tuesday.

The provision, inserted into the law by Senate Republicans, temporarily suspends a limitation on how much owners of businesses formed as “pass-through” entities can deduct in taxes from losses on other business income. The limitation was created as part of the 2017 Republican tax law to offset other tax cuts to firms in that legislation.

Suspending the limitation will cost taxpayers about $90 billion in 2020 alone, part of a set of tax changes that will add close to $170 billion over the next 10 years, according to the Joint Committee on Taxation, the nonpartisan congressional body.

The provision has fueled criticisms by congressional Democrats and some tax experts who have called it a giveaway to the wealthy and real estate investors, who frequently face large losses on their investments. Conservatives have said enacting the limitation was a mistake in the 2017 law and that suspending it gives badly needed liquidity during the economic downturn caused by the coronavirus by reducing their tax obligations.

An analysis by the Joint Committee on Taxation, a nonpartisan congressional entity, found suspending the limit overwhelmingly benefits higher-earners. About 82% of the benefits of the policy go to roughly 43,000 taxpayers who earn more than $1 million annually. Less than 3% of the benefits go to Americans earning less than $100,000 a year, the JCT analysis found. The JCT analysis included the impact of another tax change in the coronavirus legislation that allowing firms to write off 100% rather than 80% of their losses, reversing another change in the 2017 tax law.

“It’s a scandal for Republicans to loot American taxpayers in the midst of an economic and human tragedy,” said Sen. Sheldon Whitehouse, D-R.I., who requested the JCT analysis, in a statement. “Congress should repeal this rotten, un-American giveaway and use the revenue to help workers battling through this crisis.”


The $2 trillion coronavirus relief package approved by Congress last month included hundreds of billions to increase unemployment insurance benefits, send $1,200 checks to tens of millions of American families, and provide immediate relief to small business across the country.

It also included more than $500 billion in tax cuts, including a payroll tax holiday for employers and tax incentives for employers who keep workers on payroll. Republicans used the must-pass piece of legislation to make a number of changes to the tax code they had sought for years, including returning to policies from the 2017 tax law. All Senate Democrats also voted for the legislation.

Under the 2017 legislation, owners of businesses formed as “pass-through” entities and partnerships could deduct a maximum of $250,000 (or $500,000 in the case of couples) in losses off their income. That change came with other measures aimed at lowering the tax obligations for these firms, including new deductions off their federal tax obligations.

But numerous conservative and right-leaning think-tanks have said the measure was a mistake that makes it harder for businesses to adjust to years with high losses by preventing how much they can deduct in other years. Kyle Pomerleau, a tax expert at the right-leaning American Enterprise Institute, said the limit was one of the “poorly thought out” provisions in the 2017 law intended to reduce its deficit impact.

Under the coronavirus legislation, the cap was suspended, enabling wealthy investors to use millions in losses to reduce their tax burdens. The policy also applies retroactively so losses in 2018 and 2019 can also be “carried back” against the last five years.

“The tax relief gives businesses badly needed liquidity during the coronavirus pandemic while also reducing the tax penalty on risky business investments,” wrote Alan Viard, also of the American Enterprise Institute, on the think-tank’s blog.

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