Congressional Democrats have put the finishing touches on a questionable bet: that higher taxes will help tame rising prices, and that voters will reward the effort.
On Friday afternoon, the [House Democrats] approved a $300 billion tax hike via a party-line vote, 220–207, sending the Inflation Reduction Act to President Joe Biden’s desk. It passed the Senate with a similar party-line vote on Sunday. [bold, links added]
Despite the bill’s name, independent analysts have found it will have virtually no impact on inflation.
In reality, it is a pared-down version of what Biden originally pitched as the “Build Back Better” plan—it leaves aside much of the original bill’s spending, but it maintains a huge corporate tax increase, huge spending on green energy initiatives, and a plan to swell the ranks of IRS agents.
What was originally a roughly $4 trillion proposal that would have relied heavily on borrowing ended up being something of a rarity in Washington: a bill that will raise more revenue than it spends.
And where will it get that revenue? Quite possibly from you. Households earning as little as $50,000 annually are more likely to see a tax increase than a tax break from the legislation.
In the final hours before the House vote, the Joint Committee on Taxation (JCT) completed a breakdown of how the bill’s corporate tax increases would affect households at various income levels.
The JTC, a nonpartisan number-crunching agency within Congress, found that households earning between $50,000 and $75,000 are more likely to see a tax increase than a tax decrease next year.
Higher-earning households are more likely to see tax increases, but families earning more than $1 million next year are far more likely than lower-earning households to get a tax break.
That fits with what The Tax Foundation, a tax policy think tank, found when it analyzed the bill.
The Inflation Reduction Act “would also reduce average after-tax incomes for taxpayers across every income quintile over the long run,” the Tax Foundation reported Wednesday.
Those tax increases will reduce long-term economic output by about 0.2 percent and could eliminate 29,000 jobs, the group found.
Democrats pushed the bill as a cost-cutting measure that would help Americans make ends meet, reduce the federal budget deficit, and help protect the environment.
“It makes a difference at the kitchen table,” Pelosi said at a press conference on Friday morning. “And at the board room table, corporations will now have to pay their fair share.”
If only those two things could be separated as cleanly as Pelosi implies. Tax increases on corporations get passed along from the boardroom table to the kitchen table in a variety of ways: lower pay for workers, higher prices for consumers, and smaller investment returns for shareholders.
As Reason has detailed a length in recent weeks, other aspects of the bill also leave much to be desired.
It would dedicate about $300 billion of new revenue to reduce the long-term budget deficit, but that aspect of the bill is probably better understood as a plan to pay for about an eighth of the borrowing that Congress has approved since Biden took office.
Meanwhile, giving the IRS a massive budget boost so it can hire 87,000 new agents likely means more tax audits aimed at the middle class, no matter what Democrats are currently claiming.
Pelosi: “Mother Earth gets angry from time to time, and this legislation will help us address all of that.” pic.twitter.com/S9j3OyQ877
— Daily Wire (@realDailyWire) August 13, 2022
The expanded subsidies for purchasing health insurance via the Affordable Care Act’s marketplaces are likely to push inflation higher. And the bill’s aim to reduce carbon emissions to 40 percent below 2005 levels by 2031 may be plausible, but just barely.
Perhaps the only aspect of the Inflation Reduction Act as bizarre as its name is the meta-analysis of the bill that’s been taking place in political media.
Its passage is a “win” that “could give Democrats a boost heading into the midterms,” according to NPR.
It “will help validate the Democrats’ monopoly on political power in Washington and hand Joe Biden a notable presidential legacy ahead of November’s midterm elections,” gushed CNN’s Stephen Collinson.
Time will tell, but this sounds like a reprise of the claims that were made after last year’s bipartisan infrastructure package—which, regardless of what you think about its merits, plainly hasn’t done much to reverse Biden’s flagging approval rating.
Voting to raise taxes after a year of spiraling price increases doesn’t strike me as a surefire political strategy. More important, raising taxes isn’t likely to help tame inflation.
Biden and the Democrats got their pared-down legislative victory on Friday evening, but it’s probably not the political victory they’re imagining.
Read more at Reason
87,000 new IRS agents.
Headlines: “Bien Administration Creates 87,000 New Jobs.”
— all at taxpayer expense.
Thats all we get from the Democ-Rats more stupid taxes the Stupid Jackass Party just wants us to have fewer Freedoms and more useless Regulations since most of them guter dwellers are Globalists