An Easy Way to Free Up Hundreds of Billions for Small Businesses

(Bloomberg Businessweek) -- Look past President Trump’s fitful attempts to reopen the economy, and the real fight in politics right is about how to get more money to struggling business owners, now that the Small Business Administration’s emergency loan funding has run dry. 

Republicans, led by Senate Majority Leader Mitch McConnell, want to add $250 billion right away. Democratic House Speaker Nancy Pelosi has countered that she’ll agree only if hospitals and state and local governments also get funding. That’s led Republicans such as House Minority Leader Kevin McCarthy to slam Pelosi for “playing politics” and to try to force through a bill that would aid small businesses and no one else. “We’re not going to be doing, in the name of an emergency, items unrelated to the emergency,” McConnell told Fox News Radio last week.

There’s a simple fix that could provide money for everyone.

Buried in the $2.2 trillion relief bill passed two weeks ago is a provision slipped in by Senate Republicans to boost tax deductions for large real estate developers. In the haste to pass the CARES Act, apparently no one noticed it—or, if they did, they  understood its cost and who its chief beneficiaries would be. An analysis by the congressional Joint Committee on Taxation put the price tag at $200 billion over 10 years, though some analysts say it could be as much as $500 billion. The JCT found that 82% of the benefit will go to people who earn more than $1 million. Bailing out large real estate developers with retroactive tax relief would certainly seem to fit McConnell’s rubric of “items unrelated to the emergency.”

Congress could fix this problem and end the stalemate by repealing the real estate provision and redirecting the money to where it’s truly needed: small businesses, hospitals, and state and local government.

If that sounds like wishful thinking, it shouldn’t. A recent precedent is eerily similar. 

In 1997, Senate Republicans slipped into a tax cut bill a $50 billion break for the tobacco industry that wasn’t discovered until after it passed into law. When it came to light, the public outcry was so severe that Congress was forced to repeal it. The repeal amendment, sponsored by Republican Senator Susan Collins of Maine, passed by a vote of 95 to 3. “The overwhelming vote sends a clear message, first to the tobacco companies: Don’t try this type of backroom deal and deception in the future,” Democratic Senator Dick Durbin of Illinois told The New York Times. “It is really an example of the old school of politics.”

In the current pandemic, well-heeled real estate developers are no more sympathetic than tobacco executives were 20 years ago, although the fact that one of them is president of the country makes a swift reversal less likely. Even so, a push to repeal it would undoubtedly draw public support and reflect well on any politician who opted to champion small businesses and their workers rather than rich developers. One person who might consider it is Collins, who’s still in the Senate, suddenly quite unpopular at home, and facing a tough reelection race in November. 

It’s a simple, popular fix that would produce hundreds of billions of dollars for small business relief, while requiring no additional spending. With the logjam broken, Congress could then get on with the business of passing the next stimulus bill.

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