President Biden and congressional Democrats have repeatedly claimed that their latest iteration of reconciliation, the so-called “Inflation Reduction Act,” will only raise taxes on the largest and most profitable corporations. Is it true that this bill will not increase taxes on the middle class?
Mostly false or misleading. Significant errors or omissions. Mostly make believe.
An analysis by the nonpartisan Joint Committee on Taxation (JCT) refutes this claim. The JCT’s breakdown of the distributional effects of the 15% corporate minimum book tax explicitly shows that Americans in every income bracket will pay more in taxes throughout the ten-year window.
The JCT data not only shows that the middle class will see higher taxes, but that they will bear more of the burden of the tax than high-income Americans. According to the analysis, it is likely that more than half of all new tax revenue raised in 2023 would come from those earning under $400,000. Further, by 2031, Americans earning below $400,000 are projected to bear two-thirds of the additional tax revenue collected that year.
Democrats claim this does not raise taxes on the middle class because the 15% tax is technically imposed on corporations with incomes over $1 billion. Of course, this ignores who bears the burden of the tax hike, which is precisely what the JCT analysis sought to determine.
The JCT’s analysis is in line with numerous studies that find that workers bear the burden of corporate taxes. A 2017 report by Stephen Entin of the Tax Foundation found that 70% of corporate taxes are borne by labor. Other economists argue that anywhere from 50% to 100% of the tax hits workers. Leftists are still peddling the lie that only shareholders bear the burden of corporate tax hikes, hence their claim that the middle class won’t pay more in taxes.
To claim who bears the burden of the tax is irrelevant because you intend a tax to only hit wealthy corporations is incredibly misleading.