Carveouts and Tax Breaks for Whom and by Whom? Pandemic Stimulus Reflects Money in Politics

A sign in a window of a cafe reads "We will be closed until further notice. Stay well!"
A coffee shop in Asheville, NC has a sign posted, saying " We will be closed until further notice. Stay well!" Photo by Gloria Good / Alamy Stock Photo.

In the wake of the passage of the $2 trillion coronavirus pandemic relief package and the accompanying lobbying explosion, we continue to learn new details about which industries and constituencies secured what they were seeking and which did not.

From from what we know so far, however, it certainly appears that those who have spent years building up political capital in Washington through large political contributions, high spending on lobbying, and other means are enjoying particular advantages amid the flurry.

In this moment, the tremendous breadth of individuals and groups that the coronavirus pandemic is affecting, combined with the compressed decision-making timeline, sharply illuminates what we already know about how wealthy special interests use money to rig the political system in their favor.

Meanwhile, those without the same money and access to power are also profoundly affected by the unprecedented coronavirus crisis but may have difficulty having their voices heard.

Wins for Big Corporations

In the $2 trillion package, the airline industry received all $58 billion in appropriations it had requested; in addition, airports received the $10 billion they asked for, and Boeing is understood to be an intended beneficiary of the $17 billion carve-out for “businesses critical to maintaining national security.”

The crisis hit the airline industry and its many employees extremely hard—as it did many industries and individuals. But the airline industry also had something that other constituencies did not: a particularly well-established, well-funded, and coordinated lobbying apparatus to deploy

Last year, Boeing ranked as the 13-highest spending lobbyist client in the country, spending nearly $14 million on lobbying last year alone, according to the Center for Responsive Politics. On the day the stimulus passed, President Trump and Boeing’s CEO reportedly spoke by phone.

Airline CEOs and trade association executives have been major donors to both major political parties. The trade association Airlines for America is a major lobbying force, spending an all-time peak amount on lobbying the first year of the Trump administration, and last year spending twice as much on lobbying as the largest teachers’ union spent.

As Mick Mulvaney said in an unusually candid admission a few years ago “We had a hierarchy in my office in Congress. If you were a lobbyist who never gave us money, I didn’t talk to you. If you were a lobbyist who gave us money, I might talk to you.”

For its part, the casino industry did not secure direct funding in the stimulus package, but it did successfully fight prohibitions on casinos accessing the small business loans and Treasury funds.

Casinos themselves have been direct, six-figure donors to super Political Action Committees (PACs) of both parties, and casino magnate and former Republican National Committee (RNC) finance chair Steve Wynn has given millions of dollars in recent years to Republican committees, among other examples.

The industry’s stimulus-related lobbying included heavy lobbying efforts by the trade group American Gaming Association and an in-person meeting between MGM Resorts’ CEO and President Trump at the White House.

Meanwhile, small, independent businesses are worried about getting “squeeze[d] out” by the heavy and coordinated lobbying efforts from big industries.

And then there are the carve-outs that appear unrelated to the coronavirus pandemic relief, but that certain well-connected constituencies nevertheless won.

For example, wealthy individuals with large real estate holdings won a provision they had been seeking for years: a tax code change.

According to The New York Times, the stimulus package lifts the cap on how much nonbusiness income can be offset by writing off real estate depreciation; The Times describes the provision as “a boon for couples with more than $500,000 in annual capital gains or income from sources other than their business.”

Very few Americans receive over $500,000 in capital gains income every year, and those that do are not the ones hurting the most in the economic crisis.

But the ultra-wealthy real estate investors who benefit from this tax code change fit the profile of the wealthy donors who can afford to write big checks to political committees and who are, therefore, afforded disproportionate access in our political system.

Fighting for Access to Federal Funds

Now that the package has passed, efforts have turned to shaping the implementation of the program and the rules over allocations of the unassigned loans and funding pots the bill created.

Boeing’s CEO is keeping “in close touch” with Treasury Secretary Steven Mnuchin as the company expends significant resources crafting a strategy to access federal funds with minimal strings attached.

Trade associations for the restaurant and retail industries are urging the Treasury Department and the Small Business Administration to allow their members to be eligible for as many forms of aid as they can. And lobbyists from an array of industries “are scrambling to help companies tap into the hundreds of billions of dollars in loans . . . before it’s too late,” Politico reported.

Although they are now being deployed slightly differently, the same money and influence factors that were assets in the first lobbying phase appear to be advantaging wealthy special interests in this one.

For example, The Washington Post reported that private equity firms are actively lobbying for eligibility for the stimulus’ small business loans. To do so, lobbyists are capitalizing on connections to people like Jared Kushner, who has failed to divest from subsidiaries of Kushner Companies.

In 2017, Kushner Companies received a major loan from one of the firms lobbying Kushner now.

And as The Post notes “One of the biggest figures in the [private equity] industry, Blackstone Group chief executive Stephen Schwarzman, has been a frequent guest at Trump fundraisers and White House events and a top adviser to the president on China.”

Schwarzman was one of a small number of finance executives who spoke with Trump on a call where the executives voiced their views on the government’s response to the crisis. And now he’s won a seat on President Trump’s “Opening the Country” council.

Schwarzman is a megadonor who has given millions of dollars in contributions to Trump’s joint fundraising committees, Republican super PACs, the Trump inaugural committee, and other committees in recent cycles. Campaign finance records show his political giving has accelerated even further in recent months.

He wrote a $3 million check to America First Action, President Trump’s super PAC, gave $2.5 million to the Republican super PAC, Congressional Leadership Fund, and made a $10 million contribution to Senate Leadership Fund, the super PAC aligned with Senate Majority Leader Mitch McConnell, with that single check accounting for 80% of the super PAC’s fundraising that month.

Stimulus Losers

By contrast, throughout this process, we’ve seen how constituencies who lack some of these levers, who don’t have long histories of large political contributions, or who are not part of well-funded lobbying efforts have had less success in securing much or any of the aid they have sought so far.

Low-income families who lack high-speed internet connections for their kids’ now-remote schoolwork did not get any of the $2 billion in funding for Wi-Fi hot spots that education groups requested on their behalf.

Families who rely on or who could potentially benefit from the SNAP program didn’t receive any additional aid in the form of widened eligibility or increased maximum benefits.

Twenty-five billion dollars in appropriations was requested for the postal industry, but only $10 billion in loans was ultimately awarded. Childcare providers got just $3.5 billion of the $50 billion requested.

And only $400 million of the $2 billion requested for voting and election infrastructure investments made it into the final bill.

Any number of factors are informing these decisions about how aid is being allocated, and there remains a lot we do not know about who will get what, what future packages might include, and how the decisions themselves are being made.

But we know enough about the role of money in our political system to know that those who have long known how to wield it enjoy advantages in this moment that others do not.

Maggie is a researcher and investigator, following leads on campaign finance issues.