Congress DIVIDED on Key Legislation – A Tax Nightmare?
(USNewsBreak.com) – When the Senate passed the Inflation Reduction Act, a budget reconciliation bill making its way through Capitol Hill on strictly partisan grounds, the controversy began. The legislation aims to reduce the effects of inflation by lowering drug prices, establishing base tax rates for corporations, and maintaining expanded health insurance subsidies. Republicans, however, quickly claimed the measure would break President Joe Biden’s staple campaign promise that taxes wouldn’t go up for anyone earning under $400,000 a year.
Indirect Taxes a Concern for Some
The Inflation Reduction Act has faced its fair share of criticism for a variety of reasons. For instance, despite supporters’ claims that it stands to help address inflation, critics have suggested it may not have much impact.
The bill has also been under fire for its potential impact on taxes. Notably — experts don’t expect the legislation to raise individual taxes directly. But there could be other problems ahead.
CNBC reported on an analysis by the Joint Committee on Taxation (JCT), an independent watchdog for Congress, which ran the numbers on federal taxation and came up with raw figures suggesting an effective tax rate increase for a lot of people earning under Biden’s threshold. The formula the organization used includes all income and employment tax, adjusting for corporate taxes. While the actual amount due on returns won’t necessarily go up, the effect of indirect taxation is of concern to the committee.
The bill puts a 15% base rate for corporate taxes. However, companies could use loopholes and tax breaks to bring their standard corporate rate to essentially zero. Adding a bunch of new taxes to American companies could result in them passing those charges along to employees and consumers in the form of higher prices, increased benefit premiums, or decreased investment in pensions and 401(k) retirement plans.
It May Not Be That Simple
A statement about the act from both Republican and Democrat former treasury secretaries makes a point to touch on the intended benefits of the bill. Decreased drug prices and tax breaks for energy efficiency spending are expected to have a direct impact on the lives of everyday people.
What’s also recognized is the value of increasing corporate taxes as opposed to the possible negatives. Funds come from reclaimed revenue companies have avoided for years, lowering the deficit.
Some also argue that the health insurance subsidies in the bill will have a positive impact. Supporters say the continued assistance will help millions of people pay for one of the most expensive monthly bills families often face and puts $64 billion back into American pockets.
Last week, Senate Democrats enraged Republicans by voting in favor of the spending bill. It just passed through the House along party lines on August 12. House Minority Speaker Kevin McCarthy slammed the move, saying Democrats are “addicted to spending other people’s money,” even if the country can’t afford it. The bill is now headed to Biden’s desk for signing.
In the end, only time will tell if the issue has a major effect — or none at all. What are your thoughts on the bill?
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