I might actually argue the other way but I’m very on the fence about it. I hope this makes sense.

The employers would ALSO recieve the proceeds of all the work done by the employees in that time. An easy example is a general contractor. He puts about 30% for o/p, 30% labor, 40% profit. In a project that is covered in PPP funds he pays 30% o/p (if unforgiven), and has 70% profit. With PPP if he covers both o/p and labor than it’s 100% profit.

I understand this is only true of those employers who actually retained employers who were working. I do not actually know any employers who paid their employees to stay home but several did pay their employees to come and work when the normal amount of work was such that it would not be financially reasonable. In other words, if the employes literally had no increase in sales, they still closed. If the employers could make just 10% of what they made prior, since the costs were covered by PPP, they did that. That profit would have been the ‘bonus’ for the employer. Potentially, it could have been considerably higher since most businesses make a considerable increase on each employee (or why hire for that position?) This is allowed because the profit / sales / etc are not a portion of the forgiveness formula.

This means that many companies who were justifiable uncertain when they applied, recieved, and used the PPP loan and THEN did not actually experience a considerable loss recieve a considerable windfall. I am familiar with several of these. No judgement on their doing this, just that many were in that position.

I think the current scenario is actually a little progressive. By (effectively) taxing the PPP as income, it provides a greater break for those with lower income. Someone running a small business with a pass through income of 20,000 (ppp) and 30,000 (biz), for a total of 50,000 will see his PPP taxed almost not at all. The same numbers taken to the next unit (20,000 ppp and 300,000 biz) for a total of 320,000 will see it range at what? 40 – 50%? It’s actually what might be considered the ‘clawback’. 😉 They did not verify ‘need’ in advance… but this allows for a low / high earner distinction.

I’m not sure what I think about it but thought I’d share since I was suprised no one else was chiming in. I enjoy all your articles.