Inflation Reduction Act would raise taxes, but not on most Minnesotans

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WASHINGTON — Republicans are using the Inflation Reduction Act’s tax provisions to attack Democrats. They claim that the bill will raise taxes for all Americans.

The tax issue is a popular Republican topic, as endorsed by party candidates across America, including the heated contest between Rep. Angie Craig and Republican Tyler Kistner in the 2 nd congressional districts.

Kistner’s recent press release stated that “Angie Craig plans on raising your taxes.”

The Inflation Reduction Act would require corporations earning $1 billion or more to pay minimum 15% tax on earnings reported to shareholders in their financial statements. This is commonly called book income.

Kistner for Congress
Tyler Kistner

Kistner and other Republicans agree with the increase proposed on large corporations. However, it is limited. The bill’s tax provisions are being attacked by many people who fail to mention the Inflation Prevention Act, which is designed to reduce taxes and other costs for American families.

Republicans have a point. Any increase in corporate tax rates that would impact a company’s earnings is considered by most economists to fall on the shoulders of employees, investors, and customers.

V.V. said, “Corporations don’t pay taxes, but people do.” Chari, University of Minnesota Professor of Economics.

Kistner and other Republicans made a big deal of the analysis by Joint Committee on Taxation. This non-partisan congressional agency analyses tax legislation. According to that analysis, the Inflation Reduction Act’s tax provisions would increase the average tax rate for Americans by 20.6 percent to 20.3 percent.

However, most Americans wouldn’t experience a tax increase – this would be paid by investors in corporations who could see their dividends and their holdings diminish and their workers whose wages or benefits could shrink.

On Sunday, the Inflation Reduction Act was passed by the U.S. Senate. The vote was strict 50-50 with Vice President Kamala Harris deciding the tiebreaker.

On Friday, the U.S. House will be returning to Washington D.C. to vote on the huge bill. It would provide $370 million in incentives to reduce greenhouse gases emissions and extend expanded Affordable Healthcare Act subsidies for three more years at a cost approximately $64 billion. The bill would reduce prescription drug prices for the elderly, and limit the monthly cost of insulin for Medicare patients at $35 per month. Senate Republicans’ votes were decisive in preventing a larger insulin cap for all insured.

To pay for clean energy incentives, and other provisions, the bill imposed taxes on corporations, which were able avoid any levies.

Chari stated that politicians should be open and declare that a corporate tax trickling down to others is for a good cause.

The new corporate tax will not cause any financial loss for most Minnesotans, nor most Americans.

The non-partisan Committee for Responsible Federal Budget stated that the bill would result in a net tax reduction each year through 2027. New credits include an expansion of premium subsidies for people who have purchased health insurance through the Affordable Care Act exchange. Other incentives for low emission energy sources far outweigh the minimum tax on large corporations.

The Inflation Reduction Act is still referred to as a tax increase bill.

Kistner stated in an email that “in 2009 President Obama said that tax increases in the middle of recession are not something you want to do.”

Craig, a Republican who is in a “toss up” race with him, said that the 700-page bill could contain small pieces of positive policy but does not justify raising taxes for Minnesotans who are suffering from skyrocketing inflation or a recession.

REUTERS/Leah Millis
Rep. Tom Emmer

Rep. Tom Emmer (R-6th) called the new corporate tax “shell games” as it would cost American taxpayers.

He said that anyone earning $30,000 per year or more will have to pay more taxes during a virtual event hosted by the University of Minnesota’s Center for the Study of Politics and Governance.

Senator Mike Crapo from Idaho, who is the Senate Finance Committee’s top Republican, requested an analysis from the Joint Committee on Taxation. He stated that “Democrats’ approach to tax reform involves increasing taxes on low and middle-income Americans in order to fund their partisan Green New Deal.”

Craig ignored the criticisms of Inflation Reduction Act.

She stated that billion-dollar businesses must pay taxes.

Craig stated that the bill would lower the cost of living for the working family and decrease the deficit.

Rewiring America reported that the bill would include clean energy tax incentives, which would reduce the average American household’s energy bills by $1,800 annually.

Before Sen. Kyrsten Silena (D-Ariz.) forced changes in the tax section to gain her support, the Joint Committee on Taxation had completed its analysis.

To help manufacturers, the corporate alternative minimum tax was modified to allow them to continue to accelerate their assets’ depreciation. Hedge fund managers were also exempted from a proposed tax.

Managers of hedge funds make the most of millions or billions of dollars they have in “carried interests”, a fee for the gains from the money they invest on behalf of other people and institutions. The Internal Revenue Service taxes earned interest at 15% as capital gains. This tax rate is lower that the one Americans pay to the IRS. Before Sinema demanded that the Inflation Reduction Act be repealed, it sought to correct this.

A new 1 percent tax was added to the bill to make up the revenue loss from Sinema-driven tax changes.

As a reward to investors, companies buy back stocks. Shares usually appreciate in value. They also benefit from an increase in their earnings per share.

Barron’s predicts that 2022 will be a record-breaking year for U.S. buybacks with approximately $1.2 trillion expected to be spent. Alphabet, the owner of Google and Apple, are two examples of companies that have boughtback.

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