As usual, the left side of the conversation has most likely had their emotions again accessed and played by very misleading and slanted articles in the last few days. At some point I would really, really, really recommend that all of us actually READ the bills, and actually RESEARCH the background and history, before running to post/re-post information that is designed exactly for that: To get us to repost with some offhanded remark about the corruption, unfairness, or cronyism that is supposedly taking place.
Case in point: The articles that discuss the “$1.6m stimulus for millionaires” out of the Payroll Protection Act (PPA). Which the Senate passed 96-0, and the House overwhelmingly passed (a couple republicans actually voted against it – because of the dem-lead earmarks for things like the Kennedy Center grants for tens of millions, etc., that had NOTHING to do with the situation).
Let’s look at a few factors. First – would you agree that the PPA bill was put in place to help not only people (direct payments for those that qualified) and also for businesses, large and small (direct loans, forgivable based on how much of the loan was used to maintain payroll)? Let me just tell you, it was. Feel free to go read it, so you can come back and agree on this point…
Those of us familiar with the tax reduction act that was put into place last year would also agree that the tax rates for people, and businesses, were reduced. Businesses were actually heavily reduced on the top-end rates, which got many of us all lathered up that we were giving huge tax breaks to the rich again. And again, many of us didn’t review all the facts. Yes – huge tax breaks were given – which has caused a massive – seriously massive – influx of jobs and factories to re-home to the US shores. This is totally verifiable from many, many sources. But here’s the other rub that nobody talks about: The tax law also heavily reduced the amount of losses that can be written off against tax liabilities. For both business and personal income. This ability to take losses against tax liability is part of the fuel that drives businesses to take risks to get up and running: If you can lower your tax liability, you can afford to risk more $$ in business. I have seen this personally over the years: Some years I made profits in businesses, some years I didn’t. When I made money, I paid more tax; when I lost money, I could lower my tax exposure using those losses to reduce my net income. That’s how it works. But Trump’s tax law lowered that ceiling – I couldn’t write all that off any more. Net effect: I actually paid MORE taxes. Huh. Who among us that are all upset about the tax breaks actually paid any attention to that part of the law??
That brings me to the current stimulus situation. Recall that we agreed above that the money was for people (direct) and businesses (loans and grants). Recall that businesses have been capped in the last 2 years, under the new tax law, from taking large write-offs on losses. Now – also know that the stimulus money did not really support loans or grants for investors in Real Estate. These people own things, like, you know, apartment buildings, and other housing that many millions of people rent from. These people drive a construction economy in renovations and redevelopment. These people spend at risk every day, like other businesses, but not only did we cap their ability to take losses with the new tax law – we also gave them no vehicle to recover lost revenue on the front end of the stimulus bill. So, what was the answer? We inserted a provision in the bill that gave them the ability to pay less taxes in 2020 by allowing them to take losses at the old levels prior to the tax law being put in place.
We did not write them a big check. We did not unfairly advantage them. And for them to realize the full amount of the tax break, they will have to have massive losses in revenue (which is, by the way, something we call “rent” for tenants). Now, again, let’s also remember that these guys in real estate are also leveraged, often heavily. So, if they have to reduce rent or lose it altogether because their tenants, you know, have no jobs and income right now…. How do these guys pay their commercial banks for the properties they have mortgaged that all these people live in?
My apologies for those of us that don’t enjoy my Captain Obvious post this morning, as again a flurry of posts and reposts are out there, even by Hollywood actors that are misinformed, and are now fueling the fire. These tax breaks are needed to help keep these investors solvent, which keeps those tenants in housing, and keeps construction moving.
