After months of negotiations, Senator Joe Manchin (D-WV) and Senate Majority Leader Chuck Schumer (D-NY) announced last week that they had come to an agreement on a pared-down version of President Biden’s Build Back Better bill. Nearly one year after Manchin said he could not support President Biden’s landmark energy and climate legislation, the Democrats passed the revamped bill, now titled the Inflation Reduction Act. The bill was passed totally on party lines, with no Republicans voting for the legislation.
The Senate went into session around lunch on Saturday, and the members of that chamber did not leave for over 24 hours this weekend. On Thursday, Arizona Democrat Kyrsten Sinema had announced that she would support the legislation – provided a loophole that would have taxed hedge fund managers and the private equity industry was removed from the bill. On Friday, the Senate went to work to remove this provision. On Saturday, the Parliamentarian gave the go-ahead on the legislation so that it could be voted on with a simple majority. Afterwards, a “vote-a-rama” began that took the better part of 24 hours. By mid-afternoon Sunday, it was announced that the Inflation Reduction Act had been passed. It will now go to the House of Representatives for another vote; then it will presumably go to President Joe Biden’s desk for signature.
Republicans have said since Manchin agreed to support the bill that it will increase taxes on not only corporations, but also on lower- and middle-income Americans. Democrats have denied this, touting the “positives” of the bill. Unfortunately, there are many aspects of the bill that could possibly raise taxes for many Americans in all socioeconomic classes.
The Inflation Reduction Act is proposed to raise an approximate $739 billion in tax revenue over the next ten years. Plus, the bill includes $433 billion in new spending. Many economists have pointed to government spending as one reason for the surging inflation Americans have suffered under since the latter part of 2021, when inflation jumped from around two percent to just over five percent.
The Congressional Budget Office, whose statistics were quoted by Bernie Sanders as he proposed five amendments to the bill on Sunday, has said that the legislation will have “a negligible impact” on inflation. Some economists have said that inflation may actually go up a small percentage before going back down around the same amount.
A corporate minimum tax of fifteen percent will be imposed on corporations earning at least $1 billion in income; the tax will be imposed upon the “profits they publicly report on their financial statements to shareholders.” However, private equity companies and the businesses they own will be exempt from this new corporate minimum tax.
Democrats say that the negotiation power the bill gives to Medicare so that the government entity can attempt to lower drug prices for seniors. This is also supposed to cap the amount seniors pay for their medications at $2,000 per year. Free vaccinations are also a part of this plan. The promise is that the new proposal will save the government $288 billion over the next decade.
Some social media posts have held that the Republicans voted out a measure that would have capped the price of insulin at $35. This is incorrect. The parliamentarian threw the addition out as it “could be applied to Medicare but not private insurance.”
One area of the bill that is causing Americans the most concern is the $80 billion allotted to the IRS to hire more agents. While it is true that the IRS is understaffed, many are saying that this will lead to audits of lower income Americans. Democrats say this will bring in an estimated $124 billion in tax revenue. They claim the new agents are going to “crack down on wealthy individuals and corporations.”
CNBC relates that the issue of raised taxes is likely to be an indirect increase: “those with incomes below $200,000 would pay almost $17 billion in combined additional tax in 2023, according to a Joint Committee on Taxation analysis published July 29. That combined tax burden falls to about $2 billion by 2031, according to the JCT, an independent scorekeeper for Congress.”
There is also the possibility that corporations could pare down the workforce, which would cost thousands of jobs (some estimates say around 30,000 while others say 300,000).
The jury is still out regarding the exact effect of the bill on individual taxes, and rumor around Washington has it that the bill is now being referred to as a “climate” bill.
The House of Representatives is likely to take the bill up on Friday.