Ahead of a potential Senate vote on the Inflation Reduction Act of 2022 (H.R. 5376), members of both parties are at odds over projections on which businesses and individuals would be subject to tax increases, intended or otherwise.
The bill, which includes various tax provisions to raise revenues through 2031, is the result of an agreement among Senate Democrats, chiefly Majority Leader Chuck Schumer of New York and Sen. Joe Manchin of West Virginia.
The Senate Finance Committee’s ranking Republican, Sen. Mike Crapo of Idaho, said the Inflation Reduction Act would do “nothing to bring the economy out of stagnation and recession, but it will raise billions of dollars in taxes on Americans making less than $400,000.”
In further criticism of the bill, Crapo cited an analysis he had requested from Congress’ Joint Committee on Taxation. In a statement, Crapo said the JCT had found that taxes on people earning less than $200,000 would rise by $16.7 million in 2023. According to the JCT, average tax rates across the board would marginally increase.
Crapo has already decried the proposed 15% corporate minimum tax on adjusted financial statement income targeted at about 200 large corporations, saying it unfairly targets U.S. manufacturers. Senate Republicans previously opposed the so-called book tax when it was included as part of the then-Build Back Better Act.
Crapo had cited the JCT’s finding that business taxpayers using manufacturing codes under the North American Industrial Classification System (NAICS) would pay 49.7% of the additional tax from the minimum tax.
Sen. Elizabeth Warren, a Massachusetts Democrat who serves on the Finance Committee, challenged Crapo’s claim that the minimum tax was a hit on domestic manufacturers. In a statement, she said that about half of that 49.7% “would include well-known tax dodgers” and companies that outsource production of goods sold in the U.S.
Warren said she based her assertion on additional data provided by the JCT. Warren and Finance Committee Chair Ron Wyden, an Oregon Democrat, had made the request in response to Crapo’s. The follow-up by the JCT showed that 24% of those subject to the book tax would include over 3,250 taxpayers using the pharmaceutical and medicine manufacturing NAICS codes, as well as about 1,270 textile, apparel, leather, and computer and electronic product makers.
“These companies are playing the most games, and avoiding tax by manufacturing their drugs, phones, and shoes abroad,” Wyden said. “This is a minimum tax for tax dodgers stamping ‘Made in China’ on their products.”
Warren accused Republicans of “rushing to defend tax loopholes for billionaires” in their representation of JCT data.
Policy analysts at the Urban-Brookings Tax Policy Center noted in an August 2 blog post that the JCT’s initial report sent to Crapo omitted expansions to premium tax credit eligibility, which the Inflation Reduction Act would extend for three years. The JCT distribution tables also don’t take into account other energy-saving credits, according to the Tax Policy Center.
The think tank also concluded that the corporate minimum tax would be “highly progressive,” though previous research by the group suggests the policy might discourage investment.
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