The Employee Retention Tax Credit Is the Biggest Covid Scam

The pandemic tax break was supposed to cost $55 billion. The bill so far: $230 billion, and rising

WSJ editorial. Excerpts:

"The government has paid $230 billion in claims [for the employee retention tax credit (ERC)], including about $120 billion this year. The taxpayer bill will keep growing since employers have until April 2025 to claim the credit on wages paid through 2021.

Many employers are retroactively cashing in on the pandemic subsidy with the help of firms that take a 20% cut of payments."

"Congress established the ERC in March 2020 to encourage employers to keep workers on their payrolls during Covid lockdowns."

"The credit was projected to cost the government $55 billion."

"The ERC was on the verge of disappearing in December 2020, but then Congress extended and expanded it through June 2021 so more employers could take advantage."

"Under the credit’s new conditions, employers merely had to experience a 20% drop in revenue compared to 2019. They could also claim up to $7,000 per employee per quarter even if they received a PPP loan. In March 2021, Democrats extended the credit to wages paid through the end of that year and enabled small businesses that started during the pandemic to claim it.

The credit essentially became a de facto hiring subsidy that disproportionately benefited states like California and New York whose excessive lockdowns destroyed businesses. As with enhanced unemployment benefits, Congress rewarded states that stayed locked down longer. Yet even today, their unemployment rates remain significantly higher than the national average."

"Only after the lockdowns ended did millions of employers line up to exploit the credit."