Despite explicit claims from President Biden and Democratic leaders that the recently unveiled "Inflation Reduction Act of 2022" will not raise taxes on Americans making less than $400,000 per year, a nonpartisan analysis from the Joint Committee on Taxation (JCT) says otherwise.
Sen. Joe Manchin (D-W.Va.) and Majority Leader Chuck Schumer (D-N.Y.) struck a deal last week on a costly bill that revives "Build Back Better" legislation, and more specifically, funds a series of "green energy" subsidies. The catch? Americans will indeed feel pain in the form of higher taxes. The sweeping bill, includes roughly $370 billion in energy and climate spending, $300 billion in deficit reduction, three years of subsidies for Affordable Care Act premiums, prescription drug reform and significant changes to taxation. In particular, while the deal will impose a 15 percent corporate minimum tax, it will raise taxes for millions of Americans as well – with half of the tax increases impacting those making less than $400,000 per year.
See the tax changes below:
Source: Joint Committee on Taxation
On one hand, the agreement is living up to the Democrats' promise of making corporations and the wealthy pay their "fair share," but on the other hand, it is completely contradictory to their past statements.
Remember when Sen. Schumer said, "If we’re in a recession.. I don’t think Sen. Obama or anyone else is going to raise any taxes," and "You don’t want to take money out of the economy when the economy is shrinking," while going into the 2008 presidential election?
Remember when Sen. Manchin said, "I don’t think during a time of recession you mess with any of the taxes or increase any taxes" in 2010?
Remember when, just over a year ago, President Biden said, "I will not impose any tax increase on people making less than $400,000" during a congressional address? And then just a few days ago, on July 28, 2022, when he reiterated the same sentiment?
President Biden addressing Congress in April 2021.
Many experts, however, are not surprised by the findings of the study by JCT, with Michael Shellenberger, founder and president of Environmental Progress, saying: "It is standard economic practice to assume that companies would pass along at least some of their tax increase to employees."
The JCT analysis revealed the following:
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.
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 Manchin-Schumer deal is thus a blatant display of hypocrisy from the Democrats, yet it is the American people who will have to endure the consequences. In response to the announcement of the "Inflation Reduction Act of 2022," Senate Republicans are making their disapproval known. Sen. Lindsey Graham (R-S.C.), for instance, expressed his disbelief in Sen. Manchin "agreeing to a massive tax increase in the name of climate change when our economy is in recession."
Others are pointing out the stark contrast between the Democrats' approach and the Republicans' pro-growth tax reform in 2017. The Trump-era tax cuts "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," said Mike Crapo (R-Idaho), a U.S. Senate Finance Committee Ranking Member. In fact, according to data from the IRS, the cuts were proven to have a strong upward effect on economic mobility, especially benefitting lower- and middle-income households.
At a time when the country is already suffering from failing economic policies under the Biden Administration and a recession underway – although the media and the White House are diminishing the situation by insisting "we're in a period of transition" – Americans are undoubtedly in need of real relief, not additional financial burdens. This latest move will surely make people wonder: How can the Democrats be for the "little guy" or the working class and choose to increase taxes when Americans can barely afford to make ends meet?
The "Inflation Reduction Act of 2022" will move to the Senate floor as soon as this week or the next.