All that remains is President Biden’s signature. The House passed the climate, health, and tax Inflation Reduction Act (IRA) on Friday, and Biden plans to sign it into law this week. It includes a book minimum tax on very large corporations, a tax on corporate stock buy-backs, and dozens of energy tax credits.
Don’t believe the hype about the IRA raising taxes on those earning under $400,000. TPC’s Howard Gleckman dispels the political argument that the bill raises taxes on those making less than $400,000. According to three different TPC analyses, the vast majority of households will barely notice any tax change. The average after-tax incomes of high-income people will decline. But the after-tax incomes of low- and moderate-income households either will go up a bit or not change in any measurable way.
The top one percent of taxpayers will feel the biggest impact. TPC’s John Buhl reports on TPC’s new analysis of the IRA. TPC estimates that in 2023, households with incomes over $1 million would pay an additional $6,060 in taxes, while households with incomes over $4.4 million would pay an additional $41,580 in taxes. Overall, the provisions of the IRA are highly progressive.
How will the corporate minimum tax work? TPC’s Thomas Brosy details the mechanics. The measure will apply to the adjusted financial statement (book) income of US corporations with average income exceeding $1 billion and foreign corporations with average US income exceeding $100 million. It is expected to raise more than $220 billion over 10 years, but policymakers will likely continue to wrestle over exemptions.
How will the IRS use its $80 billion funding boost? TPC’s Janet Holtzblatt writes that $46 billion will be dedicated to tax enforcement targeting the very rich, large corporations, and partnerships. The Treasury Department estimates the IRS will hire about 87,000 new workers, including auditors, customer service representatives, and computer scientists. But Janet would like the IRS to answer three questions: How will audit selection tools be refined to protect compliant taxpayers? Will new auditors have the skills and experience to avoid being outmatched by sophisticated tax advisers employed by the very wealthy and big businesses? What advancements in technology will help taxpayers?
Report: Baltimore’s tax credit system is “highly inequitable.” The city’s Budget bureau finds the distribution of tax credits is inefficient and disproportionately benefits wealthier neighborhoods. Modest reforms could allow the city to cut the average residential property tax rate by nearly 8 percent.
Auxier: Georgia’s deduction for an “unborn child” is complicated and ineffective. TPC’s Richard Auxier examines the expanded dependent deduction in Georgia’s tax code. Deductions generally do not benefit those with low incomes. And a family qualifying for the full $3,000 deduction would save no more than $150. Worse, the state has not clarified who can claim an unborn child as a dependent, or specified how tax filers can document a pregnancy. Richard concludes that policymakers who want to help expecting families should start with programs that already work, like a refundable earned income tax credit, paid family leave, or Medicaid expansion.
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