Dems Manage To Sneak $60 Billion in Tax Hikes Into COVID Economic Relief Bill
The $1.9 trillion COVID relief bill has been called the most significant expansion of the welfare state since the Great Society.
Also tucked within its 628 pages is another of the Democrats’ favorite policy agendas: new tax increases.
Politico reported the approximately $60 billion in tax increases are directed at businesses and business owners, i.e. entities that create jobs and wealth rather than government dependence.
The news outlet explained that the tax increases enabled the COVID-19 relief bill to be passed through the budget reconciliation process, thereby only requiring a majority vote in the Senate, bypassing a potential GOP filibuster.
“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,” according to Politico.
“Since the provisions were added late in the legislative process, lobbyists didn’t have much time to rouse opposition to the plans.”
One of the changes limits the amount of losses people can claim on their personal income taxes to $500,000 for unincorporated businesses.
The limit was temporarily lifted last spring to keep money in the hands of business owners to help prevent layoffs.
The Senate Finance Committee said this tax law change will raise $31 billion over 10 years, according to Politico.
Another tax change targets the amount businesses can deduct for employees’ pay when CEOs and other executives earn more than $1 million.
Businesses are normally allowed to deduct all their employees’ pay as an expense. This change would mean an additional $6 billion in taxes paid.
Finally, the COVID relief bill repeals a tax provision giving multinational companies flexibility in how they account for interest payment costs.
“International tax rules are generally designed to minimize the likelihood that a multinational will pay taxes twice on the same dollar of income,” the Tax Foundation’s Daniel Bunn explained.
“One way that the U.S. rules try to accomplish this is by providing companies with tax credits for taxes paid in foreign jurisdictions,” he continued. “If a U.S. parent company has a profitable subsidiary in Germany and pays taxes to Germany, the company could potentially qualify for foreign tax credit.”
The tax increase would result in about $22 billion in revenues over 10 years.
“Some say the coronavirus package offers a hint of what’s to come,” Politico reported.
“Clearly it’s a signal that Democrats will look to high-income people and large corporations for revenue for the investment package to come,” said Seth Hanlon, a senior fellow at the leftist Center for American Progress.
Liberals love to use the word “investment” to talk about “tax and spend” big government policies.
Businesses invest, grow and create wealth, then governments take wealth.
Granted there are many worthy government projects, like roads and bridges, that are essential for businesses to function and thrive.
But that’s not what this COVID bill funds, save the 9 percent or so dealing directly with the virus.
The biggest chunk of the $1.9 trillion package goes for $1,400 payments to American adults, whether they have a need or not, and an additional $1,400 per eligible dependent, according to MarketWatch.
The price tag of that portion of the bill alone is approximately $422 billion.
It comes at a time when the economy is expanding rapidly. There were 379,000 jobs created in February and retail sales rose 4.6 percent.
The legislation also includes $109 billion for a one-year expansion of the child tax credit from $2,000 to $3,000, and $3,600 for kids under 6.
The tax credit is refundable, meaning even families without any earned income will receive it, ABC News reported.
As Politico headlined, “Congress Ends Welfare Reform as We Know It,” Congress is taking away the work requirements for families to receive government aid, as dictated by the 1996 welfare reform law.
The legislation was passed to help move families from government dependency to work — something it achieved.
According to stats from former President Bill Clinton’s White House, the welfare rolls dropped by 8.3 million people, or nearly 60 percent, by December 2000.
Prior to the COVID-19 shutdown, the United States was experiencing some of its best economic numbers in a long time, including a 3.5 percent unemployment rate — a half-century low.
What policies led to the boom? President Donald Trump reached back to the Ronald Reagan playbook of the 1980s, a time of incredible economic expansion and the best seen since World War II.
His initiatives included lowering taxes on businesses and individuals, cutting regulations on companies and increasing the nation’s energy supply.
Reagan’s election in 1980 really was a direct response to the big-government policies of the 1960s, as typified by the Great Society enacted under Democrat Lyndon Johnson.
Those liberal policies included a vast expansion of the welfare state, which resulted in a disincentive to work for both the wealthy and the poor.
The U.S. experienced negative economic growth during the election year of 1980, causing unemployment to climb still higher to 7.5 percent by the time Reagan took office in January 1981. It would top out at over 10 percent in the early years of his presidency before his economic policies took effect.
By 1983, following across-the-board tax cuts, the economy began to boom with 3.5 million new jobs created that year, followed by 3.9 million in 1984.
“There was a reason Reagan called his [re-election] advertising campaign ‘Morning in America’ because in the ‘70s and the early ‘80s it didn’t feel as though we were in morning in America. There was kind of a purgatorial, afternoon feel to the country,” Amity Shlaes, the author of “Great Society: A New History,” told The Western Journal in an interview last summer.
President Joe Biden would take us back to that purgatory.
In June, then-candidate Biden said he planned to “get rid of the bulk” of the Trump tax cuts for businesses and individuals.
There could not be a worse plan.
The Obama-Biden administration raised taxes coming out of the Great Recession a decade ago, and the U.S. experienced the worst economic recovery since World War II, CNN reported.
If Biden does not raise taxes significantly or change the pro-growth regulatory climate put in place by Trump, the economy will continue to take off.
If he does, the lesson of history could not be clearer.
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