The Inflation Reduction Act, which just passed Congress without a single Republican vote, includes three provisions the Biden administration, and nonpartisan experts, say have the potential to reduce the deficit by more than $300 billion.
First, the bill includes $80 billion in additional funding for the IRS over the next 10 years, including an additional $45.6 billion for enforcement. Most of the money will go for staffing. The IRS staff today is the same size as in 1970, despite an increase of tens of millions of taxpayers since then.
The funding is projected to bring in $203 billion in taxes owed that are not now being collected. Subtracting the $80 billion as the cost of collection, the Congressional Budget Office projects the government will come out with $123 billion in net new revenue.
In 2020, 55 corporations in the Fortune 500 paid no taxes. The Inflation Reduction Act imposes a 15 percent tax on the net income all corporations report to their shareholders.
Finally, the bill imposes a 1 percent tax when corporations buy back their own stock. Currently, a lot of that stock goes tax free to millionaire and billionaire owners.
Should Congress extend this strategy further and go after tax evaders ranging from small-time people working “under the table” to corporations who go offshore to avoid taxes? Isn’t it high-time America starts collecting taxes that are owed, paying down the deficit and saving millions in interest on the debt, which could be applied to things like stabilizing social security?
This bill, a hard-won compromise negotiated in large part by Joe Manchin of West Virginia and Chuck Schumer, the Senate majority leader, proved the Senate has begun to break Congressional gridlock.
Instead of giving the progressive Democrats everything they wanted, they pared down spending from the Build Back Better bill, came up with ingenious ways of generating the money to work productively on climate change, and passed a bill that will give the United States a shot at achieving the clean energy goals that may save our country for our grandchildren. It isn’t perfect, but it is a start.
Yes, I do think that it is “high time” that corporations and the very rich pay more in taxes. Let me explain.
First, corporations: Big corporations have become so adept at avoiding taxes that U.S.
corporate taxable income has dropped by two-thirds in the last 60 years. In times of recession, as during 2008, corporations such as airlines and banks used government bailouts for stock buy-backs, not for hiring more employees or paying their employees more.
This stock was then passed on to already-wealthy CEOs and owners, further widening the gap between employees and their bosses.
Cutting corporate taxes is ineffective at improving job growth. The U.S. is more favorable to corporations than many other wealthy countries. The reason “trickle-down” economics does not work can be summarized in two words: Corporate greed. Plus, 70+ percent of American voters favor corporations paying more taxes.
I’ll discuss taxing the very rich in my second response.
Steve Clark’s response:
The very name of the legislation, the “Inflation Reduction Act,” is not only deceptive, but is also an outright lie. The Tax Foundation stated that the bill “may actually worsen inflation by constraining the productive capacity of the economy.” They estimated that the bill would result in a loss of 30,000 jobs and a reduction in GDP.
This legislation should strike fear into the hearts of every thinking citizen. Imagine this: It appropriates $80 billion to hire 87,000 new IRS agents. But the president claims there will be no increase in IRS audits of people earning less than $400,000. (If you believe that, there’s a bridge in Brooklyn I’d like you to consider buying.)
This is liberal pork barrel at its finest. There’s $369 billion in so-called energy and climate-change provisions that completely offset any deficit reduction features, including extensions of tax credits for electric vehicles and home energy conversions away from fossil fuels.
What isn’t contained in the legislation is a single penny in reduced federal spending.
When will liberals learn that real financial security comes only when you reduce profligate spending and use the savings to pay off your debt?
May I remind my liberal friends that there is no such thing as a “corporate tax.” Corporations don’t pay taxes—their customers, you and I, do. An increase in corporate tax is effectively tak- ing dollars out of the pockets of all of us poor suckers trying to make a living down here on the bottom.
Raising corporate taxes is essentially raising taxes on yourself. I don’t know about you, Alison, but I can’t afford to raise my own taxes.
Steve, your response is loaded with the classic tropes that convince middle-class conservatives to fear the government. Seriously? Selling bridges? What a cliché! I hear that sneer in your voice when you say the word “liberal.” If you’re making less than $400,000, stop shivering!
Moving on. . .As to taxing the very rich, including tax evaders: Currently, CEOs earn 670 times as much as their employees. Sheesh!
Say your household income is $450,000. Even if you’re paying at the highest rate, at about 40%, you’ll pay about $160,000 in taxes. Ouch. Still, your post-tax income will be $290,000— which is a lot of money, and you should be able to afford a nice home and necessities, provide a legacy for your family, and enjoy many, many luxuries.
Now let’s look at more modest incomes: At $50,000, your tax rate is 12%, giving you $44,000 to spend. If a person with an income of $1 million pays 5 more percentage points in taxes, the person still has $545,000 to spend—he or she won’t feel the pinch to the extent that a middle-class taxpayer will. But if you increased the tax on the middle-income earner by 5%, that would drop a $50,000 income to $31,500.
So when you’re a real-estate developer, your properties appreciate, and you’ll have to pay taxes on that income. But if you borrow against those properties, you can show a loss.
`Or if you have an appraiser who is undervaluing the worth of the properties, you pay no taxes, or if another appraiser overvalues the properties, you can get large loans. In the end, you can get enough money flowing that you can buy gold toilets and accumulate enough cash to run for president.
So do I think that the IRS should have more agents going after guys who cheat on their taxes? Absolutely.
Steve’s second response:
Just a quick tax lesson: Your real estate developer only pays taxes on the value of the building when he sells it for a profit. If he buys the property and then plows so much money into renovations and rehab that he loses money and must sell the building at a loss, would you tax him for losing money?
Let’s say an automaker needs to build a new plant to bring out a new model. Are you saying he shouldn’t be able to claim the cost of building the plant against his income? If so, why would anyone in his right mind build a new plant that employs hundreds, or perhaps thousands, of workers?
It’s easy to say, “Tax the rich.” But the fact is, it’s the rich who hire and pay the rest of us. If they make less money, they hire fewer people and don’t expand their businesses. Everybody loses…except the government.
When you say, “tax the corporations,” you’re not really hurting the rich, but you are taking money out of millions of 401Ks of ordinary citizens who are invested in that corporation.
The U.S. has a deficit because we spend money we don’t have. When a family does that month after month, year after year, the crash is inevitable.
It’s the same with governments. Instead of hiring 87,000 new IRS agents to take money out of all our pockets, how about 87,000 new border control agents that could enable us to stop paying out billions of borrowed dollars in subsidy payments to non-citizens. Now that’s a real deficit reduction program.
You can’t solve either deficits or inflation by spending money that you don’t have.