By Ray McCarty
August 10, 2022 - On Sunday, I watched as Vice President Kamala Harris gleefully cast the tie-breaking vote in support of the "Inflation Reduction Act of 2022" (IRA), after all Democrats supported it and all Republicans opposed it, resulting in a 50-50 tie. Because the Vice President is the President of the Senate, she broke the tie and cast the deciding vote, to cheers and applause from her fellow Democrats.
So what does the bill actually cost? The Congressional Budget Office (CBO) prepared partial estimates, but did not have the full estimates ready when the Senate was ready to pass the bill, so they estimated the cost of the major parts of the bill and left the rest undecided. The bill is 755 pages. I wonder how many of the Senators, or even their staff, actually read the entire bill. So it is likely the Senate passed a bill few had completely read and they had no idea of the total cost of the bill. Doesn't that sound like politics as usual?
The problem is there are very hefty tax hikes in the bill. Everyone knows corporations don't pay taxes - people do. The taxes are rolled into the prices the corporations charge for goods and services. This is why the big reduction in corporate income taxes was such an important part of the Trump tax cut package. But this bill raises taxes on corporations by imposing an alternative minimum tax of 15% on financial statement revenue of corporations. The CBO estimates this tax will cost us $313 billion over 9 years - $52.6 billion in 2023 alone!!! Now that's a great way to jump start the economy!
Another tax increases the cost of crude oil. Fuel prices are a large part of everyone's budget these days. As Sam Drucker would say, "I'm no bookkeeper" but it seems to me increasing a tax on the main component of fuel would not ease inflation but make it worse. The tax is estimated to cost all of us $902 million in the upcoming fiscal year and more than $1.2 billion each year after that. The tax will apply to crude oil received at a U.S. refinery and petroleum products imported for storage, use or consumption, effective in 2023. It does not expire. Only the government could believe raising taxes by more than a billion dollars per year on a key component of every family's budget is the best way to reduce the inflated cost of living!
So what will the federal government do with all the extra money we will be paying? Well, they know better than us how to spend our money, so they will be giving a bunch of it back in tax credits for many things: renewable energy generation tax credits, carbon sequestration tax credits, a nuclear power production credit, various renewable fuel tax credits, and the list goes on and on. They will also spend part of it by increasing funding for many federal agencies, including the IRS. Although the IRS has a million return backlog to process, the agency gave money to deceased people during the pandemic, and the IRS currently sends erroneous threatening letters to taxpayers saying they owe additional money when the amounts were originally paid in full on time, Congress thinks the IRS can responsibly use an additional $80 billion to improve tax collections from those cheating the system. How can they crack down on tax cheaters when they haven't even processed returns people voluntarily filed? Only the IRS knows the answer to that question.
Only the government could truly believe they could tax their way out of a recession, but that is exactly what they are trying to do with H.R. 5376, the Inflation Reduction Act of 2022. The House may take the bill up on Friday and President Biden is expected to sign the bill. Hang on to your wallets!