Inflation Reduction Act
Senator Joe Manchin and Senator Charles Schumer reached an agreement on a scaled-back version of the Build Back Better Act with the “Inflation Reduction Act” that recently passed reconciliation in the Senate and is expected to pass the House tomorrow and be on President Biden’s desk soon after.
What’s in the Bill?
· 15% Corporate Minimum Tax
· Prescription Drug Pricing Reform
· Additional Money for the IRS
· Climate Change Investments
Before you declare the sky is falling let’s look a little more in-depth at the list above.
15% Corporate Minimum Tax
This only applies to corporations generating $1 billion in annual earnings. Estimates believe that this will raise over $300 billion over a 10-year period. There are still tools these corporations will be able to utilize to reduce their earnings such as Research and Development, investment expenses, and work opportunity zones. A 1% excise tax on stock buybacks is also included in this bill which is expected to generate $70 billion by 2031.
Additional Money for the IRS
This section is by far the most significant piece of this legislation for most readers of this blog. This legislation provides $80 billion to the IRS to hire 86,000 additional employees. This will allow the IRS to increase enforcement, raising questions about who will be targeted by audits in the foreseeable future. Over the last decade, audits have dropped as the IRS didn’t have the workforce available. Because lower-income people are generally easier to audit and don’t have the funds necessary to fight the IRS many GOP members of the House and Senate have alleged that the IRS will go after the middle- and low-income Americans. In response to the allegations, IRS Commissioner Charles Rettig stated that the IRS will not, “increase audit scrutiny on small businesses or middle-income Americans.”