The BIGGEST Stimulus Check JUST RELEASED

What's up you guys? It's Graham here! So lately, I've had quite a few people bring this to my attention, so much so that I felt I should make a video about it explaining exactly what's going on in the entire situation. Because when you see a title like this, trust me, you're gonna wonder what's going on.

And this is the title: "How Some Rich Americans Are Getting Stimulus Checks Averaging 1.7 Million Dollars." And guess what? Articles like this aren't exactly wrong either. These are not your typical clickbait headlines which take one piece of information and then twist and extrapolate it into an entirely different newsworthy headline without providing you any context whatsoever—like with "One Third of Americans Not Paying Their Rent." Yeah, that one was bad.

But this one, on the other hand, is kind of true. While most of the population is trying to scramble to receive a $1,200 check, which is barely enough to pay one month's worth of expenses—with no idea when that's actually going to arrive—certain people here in the United States are estimated to receive a whopping 1.7 million dollars back on average. That's almost enough to buy 12 rolls of toilet paper and five bottles of hand sanitizer. That was it! That was a joke. That was a bad joke. It was a joke!

No, seriously, there is some truth to this, so I'm gonna be explaining exactly how this loophole works and how some people are able to get so much money back from the stimulus package. And also, really quick, because I promised people in a previous video that I would open up a new video with the drum cover, here you guys go. Here's a very quick drum cover; see if you guys know where it comes from. And if you do, make sure to smash the like button. And if you don't, still make sure to smash the like button for the YouTube algorithm because it greatly helps up my channel a lot.

So with that said, let's start this video off with a quick drum riff and then we'll begin the video.

[Music]

Okay, so let's start here and I'll explain exactly what's going on because all of this started with the recently passed 2.2 trillion dollar stimulus known as the CARES Act. The goal of this package was to provide immediate relief for state and local governments, businesses, hospitals, and people in need of money. This is the package that increased unemployment benefits by $600 a week. It gave eligible Americans each a $1,200 check. It provided businesses with IDL and PPP loans, and it gave certain people an average of 1.7 million dollars in tax relief.

Wait, what? That's right! According to Forbes, 43,000 taxpayers who earn more than 1 million dollars annually are each set to receive a 1.7 million dollar windfall on average, thanks to a provision buried in the CARES Act. So if we just do the math here, 43,000 people receiving an average of 1.7 million dollars means that this gives back 73 billion dollars to people who were already apparently wealthy to begin with. But don't panic quite yet that some rich dude is sitting on a beach somewhere drinking mai tais while receiving a 1.7 million dollar stimulus check that does nothing other than stimulate his bank account.

Because how this works is just a little bit more complicated. See, the CARES Act contains quite a few provisions within its 335 pages, which, by the way, totally off topic from this, the margins on this paper make it seem like they had my high school English class, which required the assignment to be a certain number of pages, so we all just spaced out the margins as much as possible to make it seem longer than it actually is.

But anyway, I digress! This is where it all begins. In 2017, there was an adjustment to how businesses can structure losses within the company, within what's known as the Tax Cuts and Jobs Act, which kind of actually had the opposite effect of tax cuts for certain people. See, before 2017, businesses were able to write off the full amount of a business loss within a given year, which would either cancel out the tax that they would owe on other income or they could go back and deduct those losses against the previous two years or carry forward the losses into the future.

I know that might sound really confusing, but here's exactly how it works in very simple round numbers. Let's just say that you open a business, and in year one, you make a million dollars and end up paying 300 thousand dollars in taxes. But in the second year, you decide, "Wait a second! This business which asks people to smash the like button for the YouTube algorithm is doing really well, so I'm gonna go and spend two million dollars expanding the business, reinvesting back into it, hiring more employees, and getting more equipment so that that way more people can smash the like button through the YouTube algorithm."

But that second year, let's just say you didn't make any money, even though you spent two million dollars trying to get people to smash the like button. So in your tax return, you're gonna be showing a loss of two million dollars that year. Well, that means that not only do you not owe any taxes because you didn't make any money that year, but you're also able to deduct that loss against the previous year in which you made a million dollars. And you have another million dollars of losses to carry forward for the next year.

So that means in year three, you can make $1,000,000, carry forward that loss of $1,000,000 into that year, and not owe any taxes on the first $1 million that you make in the third year. This law was enacted to incentivize businesses to reinvest back into themselves by providing a favorable tax treatment that would give them money immediately as they need it.

But in 2018, that law changed. And here's what happened: When the Tax Cuts and Jobs Act passed, it limited this deduction to max out at $250,000 annually if you filed single and $500,000 annually if you filed married, depending on the source of the income. This was enacted to prevent people from deducting really large business losses against their other income, like, let's say, from a salary, investment income, or other sources of income—you name it.

So beginning in 2018, the very most that you were able to deduct from a business loss against your other sources of income became $250,000 all the way to $500,000. And then anything over that would have to be deducted against the following years. Like, you wouldn't be able to make a million dollars a year working for Boeing and then lose a million dollars on your side business and then have those two just cancel each other out entirely.

Instead, that year, I would be able to deduct $250,000, and then the next year another $250,000, and a year after that another $250,000 until I used up the entire loss. But the brand-new CARES Act included a provision that would retroactively cancel out the old provision, and it's as clear as day on page 76 of the CARES Act for anyone else who wants to read it through. Here's just the gist of it: This section overrides the $250,000 limits and allows individuals to go back to previous years and deduct those business losses against their prior tax return, which potentially gives them a massive tax break upfront.

That means people can now amend their tax returns, report all of their losses upfront, and receive a lot of money back potentially instead of receiving it in small chunks over time. Now, in terms of who benefits the most from this change, the Joint Committee on Taxation found that 82% of its recipients make more than 1 million dollars annually.

But when it comes to this, here's the full picture, and I say this as someone who does not pick sides. I don't get into politics; I just do my best to try to clear up any confusion and look at things objectively to determine is this worthwhile or is this really messed up? First, let's clear up any confusion: People making over a million dollars a year are not receiving back a stimulus check for 1.7 million dollars, but instead, on average, they're receiving that much money back only if they had business losses during 2018 and 2019 that they were able to write off of other income sources during that time instead of carrying it forward into future years.

Now, to put that into perspective, since 90% of these benefits go to the 62,000 people who made more than 500,000 dollars a year, that means this directly affects four and a half percent of tax return filers who made more than $500,000 a year beginning last year. Now, I should note that if this change did not occur within the CARES Act, these individuals would still be receiving the exact same tax break, except they would be limited to capping these deductions at $250,000 to $500,000 dollars a year.

So the old way it was written, you still got all of your money back, but instead of getting it all back at once, you would get a little bit of it back each and every year for however many years. The second, this might go without saying, but the reason why this benefits people the most who make over a million dollars a year is because those are the types of people who could afford to have a business that loses over $500,000 or more a year.

I think we'd be hard-pressed to find people who could afford such large losses when they don't make a lot of money in the first place, so I think it's pretty much a given that the main beneficiary of this are gonna be really, really wealthy taxpayers who own businesses and reinvest heavily back into those businesses. Because those are the people who could afford to do so. I'm not saying that's right or wrong; I'm just saying that is the way it is.

Third, let's be real: Do people really need unlimited business loss deductions? And this is where people might find my answer somewhat surprising, and I think yes, it can make sense if it's executed fairly and properly. Now, I know it's easy for me to say that, and it's also very easy to point your finger at rich people and be like, "You know what? They're the problem. They make money; shame on them." But trust me, give me a chance on this one; just hear it out, and maybe at the very end of it you might agree with me.

And also, for anyone curious, no, I am NOT one of these individuals who receives anything from this. I do not get any tax breaks from this whatsoever; this does not apply to me at all. So just keep in mind when it comes to all of this, I am only the messenger. The whole point of this deduction in the first place is to provide tax relief for businesses that reinvest back into buying further infrastructure, hiring more employees, reinvesting back into themselves, and further innovating.

And the hope is that a person with a side business can pursue that business even at a temporary loss by deducting that income against other sources of income; that way, the business is ideally providing a benefit to our entire economy. They're hiring more people, and even though they're spending money, the money is circulating back into our economy. And sure, I don't doubt that some people will take advantage of this by starting dubious businesses that were never meant to do well anyway.

But I think overwhelmingly people don't create businesses that just perpetually drain money. So I understand why this deduction was allowed in the first place, and I also just as equally understand why it was taken away and capped. By eliminating this deduction, it forces businesses to actually make sure they end up making money in the future and stay in business as long as possible.

But in my own opinion, this should not have been opened back up without allowing regular taxpayers to deduct more than $3,000 from their investment losses as well. See, if you're not aware, if you invest in the stock market and in any given year you have more losses than you do gains—which is quite a few people over at Wall Street Bets—then in most cases, you're limited to only deducting $3,000 a year against your ordinary income, and then anything else beyond that must be carried over into future years.

That means if you make $60,000 a year and you realized a $5,000 loss in the stock market, you could only deduct $3,000 of that loss in the first year, and then the remaining $2,000 could be deducted against your second year. Now, in my opinion, that's very short-sighted to only allow regular taxpayers a $3,000 cap on stock losses but allow business owners unlimited deductions as much as they would like.

I have a feeling this was overturned in the CARES Act to give businesses more liquidity right now upfront by giving them a bigger tax break during a time where maybe right now they're not doing so well and they need some money. So it's kind of like the Fed giving them a bit of a bailout, but instead of the Fed saying, "Here is a tax-free loan, here is a grant, here's a PPP loan, enjoy your money."

Instead, the Fed is just saying, "Hey, you know what? You could take all of your tax losses right now upfront, and hopefully that gives you enough money to stay afloat during this time." I do admit from that perspective it does make some sense, but I think realistically this benefit should be applied towards everybody, even people who experienced a big loss in the stock market who had to go and sell those stocks just to put food on the table and keep a roof over their heads.

Because yes, this 1.7 million dollar tax refund will end up going to some businesses that really need it, and yes, this will also be applied to some people who really don't need it. And I think if you open the floodgates without any income restrictions on how much they could deduct right now upfront, it should really be opened up to anyone who experienced a loss—even regular people who see a loss of more than $3,000 in the stock market.

That just seems to me to make the most sense. Although, just remember, as of now, headlines like this only apply to businesses who experienced a net loss of income beyond the amount of money that they made, and it just so happens to be that the people who make a lot of money are the types of people who are able to float those types of losses in the first place. So not everyone is receiving it, and it only benefits certain people with certain businesses who ended up losing money during those years.

I say this not as someone who's taking sides here or trying to defend the situation, but at the very least I do want to provide some clarification as to exactly what's going on. And like I said, I think something like this is unnecessary without providing everyone with a similar benefit as well—like maybe allow other people to write off investment losses retroactively as well.

I'm sure that would provide immediate relief to everyone who put too much money in SPY puts on Robinhood this month. So with that said, you guys, thank you so much for watching! I really appreciate it, as always. If you have not already destroyed the like button, make sure to do that with the subscribe button and notification bell as well.

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