Warren Seeks Clarity on Wealthy Beneficiaries of Republicans’ Proposed “Pass Through Deduction”
60% of tax savings from 199A tax deduction has been sucked up by top 1% of Americans
Washington, D.C. — U.S. Senator Elizabeth Warren (D-Mass.), a member of the Senate Finance Committee, wrote to the Joint Committee on Taxation (JCT) requesting a breakdown, by income level, of which taxpayers benefit from the 199A Qualified Business Income Deduction.
Section 199A is a tax deduction that was created by President Trump’s 2017 Tax Cuts and Jobs Act. It allows owners of certain businesses to deduct up to 20 percent of their business’ qualified income from their taxes. Republicans claim that the pass-through deduction helps small businesses that are often structured as partnerships.
However, the largest beneficiaries of the pass-through deduction are large firms and wealthy individuals, who are able to afford accountants and lawyers to exploit the deduction. For example, the owners of businesses may mischaracterize their labor income as business income to take advantage of the deduction.
According to ProPublica, these maneuvers have allowed the wealthiest one percent of Americans to reap nearly 60 percent of the tax savings created by the 199A deduction since its inception in 2017. The National Bureau of Economic Research found that there has been “no evidence” that 199A has any “real effects” on both investments in businesses or employment.
Congressional Republicans have proposed expanding the 199A deduction from a 20 percent deduction to a 23 percent deduction in their recent tax bill.
Senator Warren asked the committee to share the following information:
- A breakdown, by income level, of the individuals who benefit the most from the 199A deduction, the value of the benefit received, the size and type of businesses, and the industries that most benefit from the deduction; and
- The percentage of benefit, along with the size of the benefit in dollars, received by individual taxpayers who, for the last three years, made at least $1 million, $5 million, $10 million, $50 million, or $100 million.
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