Wealthiest Netted Billions From Trump Tax Cut They Helped Write: Report

Posted at https://www.commondreams.org/news/2021/08/11/wealthiest-netted-billions-trump-tax-cut-they-helped-write-report

ProPublica’s new investigation reveals how the pass-through businesses deduction benefited the nation’s richest.

ANDREA GERMANOS

August 11, 2021

A ProPublica investigation published Wednesday shows how Republican lawmakers and industry groups maneuvered to secure in the 2017 GOP tax law provisions that delivered billions in tax cuts benefiting the nation’s uber-wealthy, including top political donors.

“The flurry of midnight deals and last-minute insertions of language resulted in a vast redistribution of wealth into the pockets of a select set of families, siphoning away billions in tax revenue from the nation’s coffers,” wrote Justin Elliott and Robert Faturechi.

Formally known as The Tax Cuts and Jobs Act, the legislation passed at “warp speed” and was signed into law by President Donald Trump at the end of 2017, slashing the corporate tax rate and the top individual rate. The law’s critics dubbed it the GOP Tax Scam—a characterization strengthened by subsequent analyses showing how the tax code revisions brought about a massive economic windfall for the rich and corporations.

Interventions cited in the new reporting include those by Sen. Ron Johnson of Wisconsin, a climate science-denying member of the so-called “Republican Millionaires Caucus” who tried last year to block stimulus payments from going to economically devastated Americans.

Johnson pushed for a provision to “sweeten the tax break” for what are known as pass-through businesses, reported ProPublica, citing Treasury Department officials’ emails and officials’ calendars. In such entities, income is “passed through” to the business’s owners and taxed under the individual income tax. They make up the majority of businesses in the U.S.

The GOP was poised to let pass-through businesses deduct up to 17.4% of their profits, but Johnson, who’d threatened to vote no, pushed the deduction up to 20%—an increase that “can translate into tens of millions of dollars in extra deductions in one year alone for an ultrawealthy family,” according to the reporting.

“Johnson’s last-minute maneuver” to get the provision into the bill, ProPublica reported, “benefited two families more than almost any others in the country—both worth billions and both among the senator’s biggest donors.” The reporting points to right-wing billionaires Dick and Liz Uihlein, owners of large packaging company Uline, and another right-wing billionaire, roofing supply giant Diane Hendricks, who together donated “$20 million to groups backing Johnson’s 2016 reelection campaign.”

“The expanded tax break Johnson muscled through netted them $215 million in deductions in 2018 alone, drastically reducing the income they owed taxes on,” the investigation found. “At that rate, the cut could deliver more than half a billion in tax savings for Hendricks and the Uihleins over its eight-year life.”

Other megarich households reaped the benefits as well. From ProPublica:

In the first year after Trump signed the legislation, just 82 ultrawealthy households collectively walked away with more than $1 billion in total savings, an analysis of confidential tax records shows. Republican and Democratic tycoons alike saw their tax bills chopped by tens of millions, among them: media magnate and former Democratic presidential candidate Michael Bloomberg; the Bechtel family, owners of the engineering firm that bears their name; and the heirs of the late Houston pipeline billionaire Dan Duncan.

The investigation delved into how engineering and construction behemoth Bechtel secured in the final version of the bill a phrase to ensure that engineering was not an industry excluded from the pass-through deduction. In the lead-up to the bill’s passage, ProPublica found, the company “executed a full-court press in Washington, meeting with Trump administration officials and spending more than $1 million lobbying on tax issues.”

It was good return on investment. “Bechtel Corporation produced around $2.3 billion of profit in 2018 alone—the vast majority of which appears to be eligible for the 20% deduction.”

The Center on Budget and Policy Priorities has previously noted how “lobbying, conducted outside recognized procedures and largely without oversight, influenced how Treasury crafted the pass-through regulations before it issued them in proposed form” and discussed how the 2017 tax law’s “20% deduction for pass-through businesses is overwhelmingly tilted to the highest-income filers” and how that the deduction, along with slashing of the corporate tax rate, “contribute to all three of the measure’s major flaws: they worsen inequality by disproportionately benefiting the well-off; they lose significant revenue at a time when demographic and other pressures require federal revenue to rise; and they will likely encourage significant tax avoidance by creating major incentives for wealthy individuals to recharacterize their income in search of lower taxes.”

With such impacts in mind, Senate Finance Committee Chair Sen. Ron Wyden (D-Ore.) last month proposed legislation to undo the pass-through provision, which he called exemplary of “Republicans’ commitment to giveaways to the top 1%.”

“Half the benefit of the pass-through deduction goes to millionaires, and because the benefit is so skewed toward the top, many Main Street small business owners are excluded. The mega-millionaires get to write-off 20% of their income while middle-class accountants are cut out,” the Oregon Democrat said.

Wyden touted his proposal as an effort “to make the policy more fair and less complex for middle-class business owners, while also raising billions for priorities like child care, education, and healthcare.”

Read the full investigation, part of ProPublica‘s ongoing reporting project “The Secret IRS Files,” here.

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