The recent deal struck between West Virginia Democratic Senator Joe Manchin and Majority Leader Chuck Schumer is rightly taking heat as non-partisan analysis reveals the economic impact of the bill’s provisions.
Not only will the Inflation Reduction Act not measurably slow inflation–as its name suggests–but it could put more pressure on household budgets by raising taxes on most income levels including low-income and middle-class families.
Increasing taxes on businesses and households while they battle with 40-year-high inflation will pour salt on the wound of stubbornly high prices.
According to an analysis by the congressional Joint Committee on Taxation, the Inflation Reduction Act would increase taxes by about $54 billion in 2023.
More than $16 billion of that total would come from households making less than $200,000 and another $14 billion from households earning between $200,000 and $500,000.
Over the ten-year period, the average tax rate for nearly every single income category would increase. For example, the average tax rate for those earning less than $10,000 would increase from 7.3% under current law to 7.6%, and from 7.8% to 7.9% for those earning $30,000 to $40,000 in 2023.
This certainly breaks President Biden’s oft-repeated campaign promise not to raise taxes on those earning less than $400,000 a year.
Consumers and workers are also expected to pay the price of corporate book-tax increases in the bill. Tax increases on businesses are generally borne by workers through smaller paychecks and fewer jobs. Consumers end up paying higher prices as well.
Certainly, the bill provides tax subsidies and credits to buy green electric vehicles and other energy. However, lawmakers on the right believe that by 2031 when most of the benefits from these tax credits and subsidies are enjoyed by high earners, “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 White House tried to dismiss concerns over tax increases. Press Secretary Karine Jean-Pierre noted:
The JCT report that we’re currently seeing 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.
There’s no dismissing that this bill fails to provide relief from higher prices and help families struggling to make ends meet. Currently, two out of three (61%) of Americans — roughly 157 million adults — are living paycheck to paycheck, according to a new financial report. One year ago, that number was 55%. Inflation is forcing households to spend more on essentials to make ends meet. Paychecks are not keeping up with inflation as is, raising taxes would leave Americans with even less to do more with.
Raising taxes during a recession and while inflation is out-of-control sounds like the worst economic plan that the left could muster up. Yet, that is what they are set to vote on as early as this week.