‘There are no new taxes on families making $400,000 or less and no new taxes on small businesses,’ says the official summary of the Inflation Reduction Act of 2022.
Senate Democrats are hoping this week to pass the Inflation Reduction Act, a budget reconciliation package that would close corporate tax loopholes, lower drug prices, cut the budget deficit, and invest in climate change reduction. Senate Republicans opposed to the bill are spreading the lie that it will raise taxes for working families.
The false claim appears to have originated in a press release issued on July 30 by the office of Sen. Mike Crapo of Idaho, the ranking member of the Senate Finance Committee. Misleadingly citing an analysis that Crapo had requested from the nonpartisan Joint Committee on Taxation, the release says:
While Republicans’ pro-growth tax reform in 2017 reduced tax rates for all Americans in a way that increased the progressivity of the tax code and produced historic gains in job and wage growth, the Democrats’ approach to tax reform means increasing taxes on low- and middle-income Americans to fund their partisan Green New Deal. Americans are already experiencing the consequences of Democrats’ reckless economic policies. The mislabeled ‘Inflation Reduction Act’ will do nothing to bring the economy out of stagnation and recession, but it will raise billions of dollars in taxes on Americans making less than $400,000.
“Democrats’ reckless spending bill will raise taxes on all income brackets,” the Senate Republicans official Twitter account posted on Aug. 1. “In the middle of a recession, now is not the time to raise taxes.”
In reality, the package, the result of a lengthy negotiation between Senate Majority Leader Chuck Schumer and West Virginia Democratic Sen. Joe Manchin, does not increase taxes for any individuals.
It would raise an estimated $739 billion in new revenue by implementing a 15% corporate minimum tax; allowing Medicare to directly negotiate lower drug prices with pharmaceutical companies; cracking down on tax cheaters; and closing the carried interest loophole used by private equity managers to pay a lower rate on their fee income.
“There are no new taxes on families making $400,000 or less and no new taxes on small businesses,” Schumer and Manchin said in their summary of the bill. “We are closing tax loopholes and enforcing the tax code.”
An estimated $369 billion of the new revenue would go to energy and climate change infrastructure; $64 billion would pay for a three-year extension of Affordable Care Act subsidies; and the rest would be used to reduce the federal budget deficit.
Contrary to Crapo’s assertions, the Joint Committee on Taxation examined only the revenue provisions and provided an estimate of who in the economy would ultimately bear the brunt of the higher corporate taxes.
The analysis supposed that with smaller corporate profits, businesses would give less money to their employees and shareholders.
In an emailed statement, Sen. Ron Wyden (D-OR), who chairs both the Senate Finance Committee and the Joint Committee on Taxation, told the American Independent Foundation:
A family making less than $400,000 will not pay one penny in additional taxes under the Inflation Reduction Act. This is the same trickle down economic argument Republicans have been making for decades, and the American people don’t buy it. The American people are smart. They knew that Republicans’ 2017 corporate giveaway did not give them a tax cut. They know that making companies with billions in profits pay their fair share isn’t raising their taxes. The analysis Republicans are pointing to is also incomplete. It doesn’t include the benefits to middle-class families of making health insurance premiums and prescription drugs more affordable. The same goes for clean energy incentives for families.
Republicans used the same dishonest tactics in 2021 against President Joe Biden’s Build Back Better framework, which would have included similar corporate tax measures and also would have raised taxes for some individuals earning more than $400,000 annually. They made the same false claims that the framework’s provisions included a tax hike for “working families” and “middle-class Americans” based on an analysis by the nonprofit Tax Policy Center that found a small fraction of the corporate tax increases would be passed on to workers and stockholders. They ignored that proposal’s other provisions that would have helped those same individuals.
White House press secretary Karine Jean-Pierre told reporters on Monday that the analysis “is incomplete because it omits the actual benefits that Americans would receive when it comes to prescription drugs, when it comes to lowering energy costs, like utility bills. It does not include that.”
The pro-electrification nonprofit group Rewiring America, which says that it is “focused on decarbonizing our world fast enough to limit global warming to 1.5 degrees Celsius, and to ensuring that no household or community is left behind,” estimates that the clean energy tax incentives in the package would lead to an average energy bill savings of $1,800 a year for every American household if they used such incentives to install new electric pumps for home and water heating and replace their gas-powered car with an electric car.
Still, Senate Republicans, including Cindy Hyde-Smith of Mississippi, Todd Young of Iowa, Shelley Moore Capito of West Virginia, Steve Daines of Montana, John Cornyn of Texas, and Tommy Tuberville of Alabama, have spent the past several days repeating the lie that the Inflation Reduction Act contains a tax increase for individuals.
“Remember @JoeBiden’s ‘promise’ to not raise taxes on anyone making under $400k? He lied,” National Republican Senatorial Committee Chair Rick Scott falsely tweeted on Monday. “He’s done it before & he’ll do it again with Democrats’ reckless, tax-hiking plan.”
Chuck Marr, director of federal tax policy for the Center on Budget and Policy Priorities, told the American Independent Foundation that the Republicans’ claim is totally untrue: “They are trying to say that a minimum tax on the largest, most profitable multinationals will fall on working-class people and not corporate shareholders. This just shows how weak their hand is, and if it’s explained to people, they’ll see right through it.”
Published with permission of The American Independent Foundation.