Surprise: Misleadingly-Named “Inflation Reduction Act” Will Raise Taxes Even On The Middle Class
“The more this bill is analyzed by impartial experts, the more we can see Democrats are trying to sell the American people a bill of goods”
Joe Biden has repeatedly claimed that under his plans, no one making under $400,000 would pay any increase in taxes.
That may not be entirely accurate.
Stop me if you’ve heard this one before.
Biden: "No one making under $400,000 will see their federal taxes go up. Period."pic.twitter.com/ps7syHNHro
— Brian Tyler Cohen (@briantylercohen) March 31, 2021
Now consider this:
Biden promised no tax hikes if you make less than $400K per year
The “Inflation Reduction Act” raises taxes for everyone making over $30K per year pic.twitter.com/4D4gwsqjdu
— John Hasson (@SonofHas) July 30, 2022
Here’s a bigger view via the Senate Finance Committee:
Senate Republicans point to the nonpartisan Joint Committee on Taxation to elaborate on this:
JCT: Democrats’ Proposals Increase Taxes on Millions of Americans
The nonpartisan Joint Committee on Taxation (JCT) estimates the Democrats’ latest reckless tax-and-spend proposal will increase taxes on millions of Americans across every income bracket, with more than half of the tax increases on Americans making less than $400,000 per year.
“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,” said U.S. Senate Finance Committee Ranking Member Mike Crapo (R-Idaho), who requested the analysis. “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.”
According to JCT:
- In 2023, taxes will increase by $16.7 billion on American taxpayers earning less than $200,000—a nearly $17 billion tax targeted solidly at low- and middle-income earners next year, amidst stagflation.
- The $17 billion hit alone is confirmation that the Biden pledge to not raise taxes on anyone earning less than $400,000 is shattered by the latest tax-and-spend bill.
- The proposal would raise another $14.1 billion from taxpayers earning between $200,000 and $500,000.
- According to JCT data, 98 percent of all tax returns filed by those in the $200,000 to $500,000 category are filed by those earning between $200,000 and $400,000, with at least three-fourths of the income in the $200,000 to $500,000 category also coming from those below $400,000, meaning it is likely that at least half of all new tax revenue raised next year would come from those earning under $400,000.
- Throughout the ten-year window, the average tax rate for nearly every single income category would increase.
- By 2031, when the new green energy credits and subsidies provide an even greater benefit to those at higher incomes, those earning below $400,000 are projected to bear as much as two-thirds of the burden of the additional tax revenue collected that year.
“The more this bill is analyzed by impartial experts, the more we can see Democrats are trying to sell the American people a bill of goods,” Crapo continued.
This doesn’t even take into account the inflation tax which millions of Americans are already paying every day and which could rise if Biden’s plan goes forward.
David Harsanyi recently wrote at the New York Post:
Democrats’ high-spending ‘Inflation Reduction Act’ will do just the opposite
The first thing to remember about the reconciliation bill Sens. Joe Manchin and Chuck Schumer agreed to Wednesday is that despite its utterly preposterous name, it has absolutely zero to do with inflation. The Inflation Reduction Act is crammed with the very same spending, corporate welfare, price-fixing and tax hikes that were part of Build Back Better — long-desired progressive wish-list agenda items. Pumping hundreds of billions into the economy will do nothing to alleviate inflation. The opposite.
Let’s also remember the Democrats’ deflection on inflation last year — claiming it was “transitory” and “no serious economist” is “suggesting there’s unchecked inflation on the way” and so on — was all part of a concerted political effort to ignore the problem long enough to cram through a $5.5 trillion iteration of their agenda. And when inflation suddenly became non-transitory and politically problematic, the Biden administration argued that more spending would relieve inflation. It doesn’t care about the economy, as long as dependency is being expanded.
The bill is far more likely to spike consumer prices than not. You can hate corporations with the heat of a thousand suns and grouse about the lack of fairness in the world, but it won’t change the fact that businesses don’t pay taxes, they collect them.
When the Biden administration tells us that their plan will save money for Americans, our response should be one that Biden knows well.
Come on, man.
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Comments
So we get the double whammy tax hit: income tax on our incomes and inflation tax on the cost of everything. By far, the biggest by far and most “inclusive” is inflation where the poorer you are, the harder you are hit.
Another issue that is beginning to be discussed a bit more is the vast difference in the impact of inflation and wages differentials between urban and rural areas.
From 2020 to 2022
Urban discretionary income fell 13.1%
Rural discretionary income fell 49.1%
Wage gain average in urban areas were 8.6% but rural areas only rose 6.1% over the same period. Iowa State University published this data last month. Daily Wire has a short summary.
The headline CPI figure is based on Urban data not a national average and it masks the true impact on rural areas. Rural workers and consumers drive greater distances, use tractors and propane tanks. All of which means rising energy costs are magnified for rural areas. Nor does the CPI (Urban) index capture costs for fertilizer or hay or a myriad of other items used in rural areas.
Bottom line is we should expect that the more rural the CD, County and State that are being hit harder by inflation to vote to punish the party in power; d/prog in the midterm elections.
Bottom line is we should expect that the more rural the CD, County and State, the more feeble the silver lining. In fact, there is no silver lining and Biden’s new definition of deep shit is we’re not really in a recession.
However, the Democrats that run the government are so powerful they can command inflation to just go away by passing an Inflation Reduction Act. It reminds me of the Audio-Animatronic figures in Disney Haunted House which is nothing more than computer-generated projections.
Computer generated silver lining.
The real silver lining is that, in rural areas, once a tipping point in costs is reached and agricultural production isn’t profitable, the current surplus will not be exported to urban.areas because it won’t exist. It will be more traditional methods with far lower yields and those consumed locally.
Instead there will likely be an expanded barter economy based on the relatively high trust society remaining in rural areas among family, friends, neighbors and community. Urban areas ate very likely to end up sucking hind tit.
To those of you still in urban areas ‘May the odds be ever in your favor’ in your upcoming games when/if shelves are emptied for the last time. At least you have home field advantage. Sort of.
Biden’s figurative “deep shit” won’t fertilize the fields like the petroleum based fertilizer he made impossible to get.
Everything from Democrats/Socialists/Marxists is smoke and mirrors, if anything what they say is exactly the opposite.
FJB. He is the biggest arsehole ever to rise way beyond his level of incompetence.
He rose beyond his level of incompetence when he was five years old.
“Read my. lips: truinderdashdubaderprezure.”
How many RINOs going along with this crap? At least the Ds are honest about being against us. But the RINOs will smile and shake your hand while they stab you in the back with the other.
How many RINOs are going along with this crap? All of them.
Holy cow, you’re RIGHT! We need to inform the Disinformation Board IMMEDIATELY, so they can get the word out!
What would be the name of the bill if the OMB were to name it? Or if we let the ‘Pinnochio panel’ assess the truthfulness of the name as compared to the content?
Somehow, I don’t think “Last chance lying pork laden stick-it-to-the-middle-class pig trough because there is a crimson wave gathering on the horizon” would be an acceptable name for the bill.
The “One More Turn of the Leftist Screw” bill might be apropos….
Where are the details?
They will be available immediately after the bill is passed.
I downloaded the bill last week, and the joint committee analysis today. The bill does not change the tax tables, and the analysis doesn’t say where the effects on individual taxpayers would come from.
Now, I am familiar with the Joint Committee on Taxation, and trust their numbers, but still their release doesn’t show the work behind their conclusions. I’d also point out that the amounts in question, relative to the size of the whole thing, are trivial.
I could easily change my mind with a more substantial case. But it’s simply not there.
You do understand that the tax rate tables isn’t the beginning much less the end? What matters far more is how various economic activities are categorized.
As an example ‘carried interest’ which is broadly defined as compensation to portfolio managers in the form of a share of the profits of the ventures within the fund for ‘management services’ of those ventures is currently categorized as a capital gain v income.
Long term capital gains, investments held three years, pay a maximum tax rate of 20% v the top income tax rate of 37%. Categorizing it as a capital gain also excludes it from collection of SSI and medicare taxes.
Exactly how does any change in the treatment of carried interest change the taxes paid by the working and middle classes? Be specific. Thank you, Look, I’m no fan of this so-called “compromise,” but that’s neither here nor there. Thus far, no one has detailed the claim that taxes will go up for the lower-end taxpayer.
Okay, I looked further. The basis of the higher-taxes claim is that, by setting a 15% minimum corporate tax rate, companies that have found ways to pay less than that will now have to pay the minimum, and in doing so will react by reducing (or failing to increase) compensation to their employees.
I’m generally sympathetic to the argument that corporate taxes are paid by their employees, although I’d be interested in seeing a thorough analysis by an objective source. In this particular case, I’m doubtful of the claim for two reasons. First, it’s not a big change. Second, the JCT apparently didn’t include any benefits from other parts of the bill.
My main immediate interest in the bill was its provisions for electric car tax credits. I think the credits are stupid, but I’m planning to replace my EV with another one and was interested to see how it would affect us. The claim that it will increase taxes at the low end is dubious to me, and rests entirely on theoretical assumptions. As much as I respect the JCT, they’re making a prediction, and even the most authoritative forecasters are rarely correct.
It kills me to say the following, and rest assured that it’s a freak occurrence, but this one time I find myself agreeing with none other than New York magazine. Please, kill me now, but this one time I think they’re right. It happens. Sometimes the other guy is right. This is one of those moments.
https://nymag.com/intelligencer/2022/08/biden-manchin-raise-taxes-middle-class-400000-campaign-promise-corporations-rich.html
By the way, there’s a silver lining here. The JCT, which is bipartisan, now accepts the longstanding assertion by conservatives that corporate taxes aren’t paid entirely out of profits. It’s baked into their analysis, and the committee signed off on it.
If I were the Repubs, I’d take note of this for use at some other time. But in this particular case? Nope, because the JCT didn’t look at countervailing effects from other provisions in the legislation.
RC,
I didn’t claim that the middle or lower economic classes would be directly impacted by changing the categorization of carried interest from a capital gain to income. I simply used it as an example of how the published tax rate table are not the end of the discussion.
One way the the middle and lower class would benefit would be, all else equal, the additional revenue into Social Security and Medicare trust funds which would extend the life of these programs a bit. Of course, some shift would occur as carried interest was dropped in favor of equity positions or other options to minimize overall taxation so it wouldn’t be straightforward x is now 100% taxable so it generates y revenue.
Changes in tax laws always have consequences because those who can will alter their behavior to avoid taxation. People respond to incentives. Some guy one the factory floor has less opportunity to alter the composition of his revenue than a hedge fund manager. That doesn’t even consider increases in costs as a result of increased taxation. Those costs get passed along to consumers and as you say the govt is beginning to recognize that that people as consumers and employees and owners pay taxes not companies themselves.
For the record, not only did I not accuse you of making the claim, but I wouldn’t unless you did, which you didn’t.
The claimed deficit reduction from the bill is bullshit. It depends on a 2025 “sunset” for the ACA. When (not if) it’s extended after that, the forecast deficit reduction declines by about three-quarters to an immaterial $89 billion over something like a decade.
The JCT’s six-page explanation does not break down the tax impact of each provision. I have learned elsewhere about the ACA sunset, which has been cleverly hidden in that wordburger. My issue in these comments is narrow: If they’re going to make the claim, they should detail that claim and examine everything else in the bill that might move the needle.
Maybe they did that, but if so, they sure as hell have a funny way of doing it. Politics is politics, but facts stand on their own. I don’t care who anyone is. I want facts, logic, and a credible effort at objectivity.
50 shades of Obamacares. Sustainable progressive prices and availability through shared responsibility and selective subsidy schemes.
Just a reminder (as if it is needed) Government spending for Medicare/Medicaid and Social Security will likewise skyrocket as the baby boom hits retirement age and mandatory Social Security Cost of Living Allowances kick in. Oh, and most government debt is held in short-term treasuries (since for some reason nobody wants to lock in a long term bond at near-zero interest) so every tick of the inflation meter winds up costing the taxpayers billions in bond interest.
The cure (of course) for this as presented by the Democrat party is higher taxes, more spending on pork barrel projects they get kickbacks from, and… um… Nope, that’s it.
“grind them between the millstones of taxation and inflation”