Democrats claimed the Cut Inflation Act would help ordinary Americans, but new analysis suggests people earning less than $400,000 a year could end up paying $20 billion of the new tax revenue it reports.
President Joe Biden signed the law in August, pumping $473 billion in new climate and health care spending, but there are strong concerns it will do little to curb inflation.
In fact, middle-class Americans will pay new taxes in direct contradiction to Biden’s promise not to increase penalties for people earning less than $400,000.
Republicans continue to criticize the bill, saying it will lead to taxes on ordinary Americans and do little to help reduce soaring costs.
President Joe Biden signed the law last August, pumping $473 billion in new climate and health care spending, but there are serious concerns he won’t do much to curb inflation. and will instead result in increased household costs and an overall bill.
The bill includes $430 billion in spending, generates $737 billion in revenue over a decade and is expected to reduce the deficit by about $300 billion.
The House passed Bill 220-207 on a party vote after it cruised through the Senate 51-50 with all Democrats and Vice President Kamala Harris voting for it.
He dropped many key social programs from Biden’s original proposal, Build Back Better.
It raises $265 billion by allowing the government to negotiate with drug companies to reduce Medicare prescription drug costs.
Its climate provisions, totaling $369 billion, are expected to cut carbon emissions by 40% from previous levels, and they include extensions to Affordable Care Act grants totaling $64 billion.
The new excise tax on share buybacks came at Sen’s insistence. Kyrsten Sinema (D-Arizona), after overturning a provision intended to close the “carried interest loophole”.
President Joe Biden signed the law last August, pumping $473 billion in new climate and health care spending, but there are serious concerns he won’t do much to curb inflation. .
A $6.5 billion tax on natural gas that will increase household energy bills
The Cut Inflation Act includes three major energy taxes that could increase household energy bills.
One such tax is a regressive tax on US oil and gas development, which is expected to raise taxes by $6.5 billion.
The tax hike goes against President Biden’s promise not to raise taxes on Americans earning less than $400,000 a year.
According to the American Gas Association, this methane tax alone could lead to a 17% increase in the average family’s natural gas bill.
Although retail energy prices have already hit multi-year highs in the United States, Democrats have opted to put this tax on the bill.
Biden administration officials have acknowledged that this type of tax, which raises consumer energy prices, goes against President Biden’s $400,000 tax pledge.
The annual inflation rate for the United States is 7.1% for the 12 months ending November 2022 after rising 7.7% previously, according to data from the United States Department of Labor released on December 13.
A $12 billion tax on crude oil that will increase household costs
Sources say Democrats are proposing a 16.4-cent-a-barrel tax on imported crude oil and petroleum products that should be passed on to consumers in the form of higher gasoline prices.
This tax hike also goes against President Biden’s promise not to raise taxes on Americans earning less than $400,000 a year, and administration officials have acknowledged that it violates that commitment.
Moreover, the tax increase is linked to inflation, which means that it will also increase as inflation increases.
The Joint Committee on Taxation (JCT), a nonpartisan organization, estimates that this provision will generate $12 billion in taxes.
Inflation jumped 9.1% in June, the fastest since 1981. Prices rose 0.1% for the month of November, or 7.1% over the past 12 months.
$1.2 billion coal tax that will drive up home energy bills
$1.2 billion coal tax expected to drive up household energy bills
Democrats are proposing a tax hike that more than doubles current excise taxes on coal production.
Under this proposal, the tax rate on coal from underground mining would increase from $0.50 per tonne to $1.10 per tonne, while the tax rate on coal from surface mining would drop from $0.25 per tonne to $0.55 per tonne.
The Joint Committee on Taxation (JCT) estimates that this will generate $1.2 billion in taxes that should be passed on to consumers in the form of higher electricity bills.
A $74 billion stock tax that could hit nest eggs, including 401Ks, IRAs and pensions
Democrats are proposing a new federal excise tax on stock buybacks, which would reduce the value of household nest eggs and retirement savings accounts, including 401(k), IRAs and retirement plans .
This tax could also have a negative impact on union pension plans and put American employers at a disadvantage compared to China, which does not have such a tax.
Stock buybacks are known to help grow retirement accounts, and this tax could discourage companies from making buybacks, which would negatively impact the retirement savings of the 58% of Americans who own stocks and more than 60 million workers invested in a 401(k).
Corporate-sponsored funds accounted for $4.45 trillion in market value in 2017, while union-sponsored funds accounted for $409 billion and public-sponsored funds, which benefited teachers and police officers, totaled $4. .25 trillion.
A tax on buyouts could also result in significant compliance costs for U.S. businesses, which could be passed on to working households.
$74 billion stock tax could hit nest eggs, including 401Ks, IRAs and pensions
$225 billion increase in corporate income tax that will be passed on to households
Democrats are proposing an alternative minimum tax of 15% on income from financial statements of U.S. companies reporting $1 billion in profits over the past three years.
This tax increase would have to be borne by working families in the form of higher prices, fewer jobs and lower wages.
A report by the Tax Foundation found that this tax would reduce GDP by 0.1% and result in the loss of 27,000 jobs.
The Congressional Budget Office estimates that this provision would raise taxes by more than $225 billion.
The Joint Committee on Taxation (JCT) determined that 49.7% of this tax would be borne by the manufacturing industry, which is already struggling with supply chain disruptions.
The Tax Foundation also warned that the disproportionate tax burden on key industries could further exacerbate current supply chain problems.
The report concluded that “the coal industry faces the heaviest burden of the minimum tax on the books, facing a net tax increase of 7.2% of its pre-tax book income, followed by manufacturing of automobiles and trucks, which faces an increase of 5.1%”.
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