A Tax Cut for The Top 1%? That’s Not COVID-19 Relief
By Carol Hedges
Ever since the COVID-19 pandemic began, the deluge of data and reports on the health and economic consequences of the coronavirus has been overwhelming. This week, as virus-related deaths nationwide passed 30,000, we also learned that US debt is expected to exceed the size of the overall economy for the first time since World War II. Horrible as it’s all been, I thought I had grown accustomed to reshaping my perspective and my emotions on the magnitude of the crisis daily.
And yet, this week I read something that did more than just surprise me. It literally made me sick to my stomach. The CARES act, a bill that my organization evaluated and even lauded as desperately needed relief for millions, contains a provision that will provide some of the wealthiest people in the country with billions of dollars they would have otherwise paid in taxes.
CFI missed this “easy-to-overlook provision” because we were squarely focused on the relief provisions for the workers and businesses who’ve lost their livelihoods as we try to “flatten the curve.” We spent our time combing documents, comparing notes with partner organizations, getting insight from small business groups, sharing in the pain felt by immigration advocates, and doing everything else necessary to understand what the federal response will mean for Coloradans. As we focused on our priorities, we neglected to scrutinize the bill’s other provisions more heavily, including those that benefit the country’s wealthiest and most powerful.
As Congress denied $1,200 direct cash payments to millions of immigrants who file their taxes using an Individual Tax Identification Number (ITIN) instead of a Social Security number, they carved out a generous deduction that applies only to those who earn over $500,000 in income. Rough calculations suggest that providing the $1,200 cash payment, along with a $500 per-child boost, to families who file using an ITIN would have cost just under $7 billion. The portion of the tax break to benefit those earning over $1 million, by my rough calculations, will cost about $75 billion.
This provision also has real costs closer to home. Since Colorado’s tax code links the amount of a filer’s income subject to state taxes to their federal taxable income, state revenue will be further drained. At a time when Colorado is already expected to be getting $3 billion less in revenue to pay for the public services we’ll need to recover from the pandemic, Colorado’s wealthiest will be able to deduct losses on their real estate investments from as far back as 2017. It’s incredible and infuriating.
For years before COVID-19 even existed, our upside-down tax code let the highest-earning Coloradans avoid contributing their fair share of the costs of essential public services. Now, because of this tax break, we’ll have even less to face one of the greatest fiscal challenges in our history.
The crisis created by COVID-19 didn’t cause the weaknesses in our social fabric, but it is exposing them. This shameful piece of the stimulus bill demonstrates how difficult it will be for us to make sure the costs of this crisis are spread equitably rather than being borne disproportionately by low- and middle-income families.
When Congress returns to work to consider another round of badly needed federal aid, I hope they will rethink these provisions. Failing that, I urge the members of the Colorado General Assembly and the governor to decouple Colorado from this section of the federal tax code and spare us from this unwanted and inequitable piece of tax policy.
