It comes as no surprise that Joe Manchin, Chuck Schumer, and Joe Biden have omitted key facts from the Inflation Inflation Act of 2022 after coming to an agreement earlier this week.
Democrats are desperate for a legislative victory amid a sea of losses, but banking on America’s collective ignorance about federal spending during a period of recession and record-high inflation is the only hope the White House has to retain any support for the bill.
New modeling by the Tax Foundation estimates that the Democratic inflation legislation’s tax hikes would eliminate some 30,000 jobs.
The nonpartisan Tax Foundation, which generally favors lower taxes, released its analysis of the legislation being championed by Sens. Joe Manchin and Chuck Schumer on Tuesday.
The group estimates that the tax changes — the biggest of which would be a 15% minimum tax on a company’s “book income,” higher taxes on the carried interest income earned by private equity firms, and additional funding for the IRS — would result in a net loss of jobs and would likely have negligible effects on inflation.
The plan, called the Inflation Reduction Act, would reduce long-run gross domestic product output by about 0.1% and slash roughly 30,000 full-time equivalent jobs in the United States, according to the group.
The modeling also found that the plan would decrease wages by about 0.1% and raise just over $300 billion in net revenue.
The most notable aspect of the Manchin-Schumer legislative proposal is that it would levy a 15% minimum tax on the book income of companies.
[source: The Washington Examiner]
The U.S. now has a 21% corporate tax rate, which it assesses based on companies’ tax returns. The new plan would assess a minimum 15% tax on the adjusted financial statement income of corporations, something Democrats contend would raise $313 billion in new tax revenue.
The proposal also includes hiking taxes on carried interest, a form of income earned by private equity funds that are subject to a lower tax rate.
While the Democratic legislation highlights inflation reduction as a key priority, the new modeling found that while its effect on inflation is particularly uncertain, it would “likely close to zero.”
That is similar to the findings of the Penn Wharton Budget Model, hosted by the University of Pennsylvania’s business school, which were that the legislation’s effect on inflation would be “statistically indistinguishable from zero.”
Republicans have rallied in particular against the minimum book income tax, contending that it will hike taxes for the middle class and harm U.S. manufacturers.
The JCT found that because of increased taxes on corporations, people in every tax bracket would suffer losses. The overall tax burden for those earning less than $200,000 annually would increase by $16.7 billion in 2023, the JCT’s analysis found.
Still, the White House said those concerns are overblown because the JCT scoring, requested by Republicans, doesn’t include a calculation of the effects of Obamacare tax credits, prescription drug savings, and clean energy tax credits.
Senate Republicans, citing the JCT, have also said that nearly 50% of the tax would be borne by the manufacturing industry, a projection the GOP said would hurt manufacturers when they are already suffering from explosive inflation and supply chain disruptions.
Democrats, though, assert that the 15% corporate minimum tax paid by manufacturers under the proposal would be borne by “well-known tax dodgers” in the tech, apparel, and pharmaceutical industries.
Tax and spend, tax and spend — it’s the only way Democrats can come close to paying for their wild progressive social spending. But even an increase in tax revenue won’t cover the massive spending projects Biden has coming down the pike.
Author: Vasily Ivanov
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