The Senate passed a sweeping $750 billion bill with provisions regarding health care, climate change, and taxes.
The Inflation Reduction Act was passed on Aug. 7 after a 51-50 vote. Vice President Kamala Harris cast the tie-breaking vote after the 16-hour ordeal which began on Aug. 6.
Among the 750-pages of provisions, the bill will increase the Internal Revenue Service’s budget by $80 million. Just over $45 billion would specifically be used for enforcement, including closing tax loopholes and pursuing people with unpaid taxes. If the act becomes law, the agency would have the ability to hire 80,000 additional auditors and agents.
Under the IRA, businesses that earn over $1 billion each year would be subject to a 15% tax on the earnings reported to shareholders. There would also be a 1% tax on company stock buybacks, per the Houston Chronicle.
“The idea is that the government could bring in more money by examining corporate and high-income returns than it does by pursuing lower- or middle-income taxpayers who make mistakes on their returns or underpay their taxes by small amounts,” reports The Washington Post.
The Post found IRS data showed that 51% of the agency’s 2021 audits were of taxpayers whose incomes are below $75,000. Another 26% were of people with incomes between $75,000 and $200,000.
According to The Hill, the extra revenue generated by the IRA “is expected to lower the deficit by $203 billion over the next decade.”
Steve Forbes, the editor-in-chief of Forbes, and economist Stephen Moore have pointed out that the IRA adds new tax loopholes, including new green-energy tax write-offs, to a 30,000-page tax code.
“All this enforcement activity won’t raise nearly the money Congress hopes it will. The backbone of our tax system — as almost all IRS commissioners have noted — is voluntary compliance from the 150 million American workers and businesses that file returns each year,” Forbes and Moore wrote in an opinion piece published by The New York Post.
Senator Joe Manchin agreed to vote for the bill after negotiations with Senate Majority Leader Chuck Schumer of New York.
“Rather than risking more inflation with trillions in new spending, this bill will cut the inflation taxes Americans are paying, lower the cost of health insurance and prescription drugs, and ensure our country invests in the energy security and climate change solutions we need to remain a global superpower through innovation rather than elimination,” the West Virginia Senator said on July 27.
“Tax fairness is vital to our nation’s economic future,” Manchin said. “It is wrong that some of America’s largest companies pay nothing in taxes while freely enjoying the benefits of our nation’s military security, infrastructure and rule of law.”
“I support the Inflation Reduction Act of 2022 because it provides a responsible path forward that is laser focused on solving our nation’s major economic, energy and climate problems,” he added.
All 50 opposition votes were cast by Republicans.
South Carolina Senator Lindsey Graham called the bill a “gimmick” that would “make everything worse” during an interview on CNN.
“I voted for a bipartisan infrastructure bill, I voted for gun legislation, I’m not going to vote for this,” Graham said. “The minimum tax of 15% destroys expensing. Now what does that mean – if a company buys a piece of equipment, they could expense it under the 2017 tax cut in the same year they bought it – that goes away.”
The House of Representatives is expected to vote on the IRA on Aug. 12. Because the Democrats have a narrow majority in the House, the bill is expected to pass and ultimately be signed into law by President Joe Biden.
