This Is Probably A Done Deal

Now that Arizona Senator Kyrsten Sinema has agreed to vote for it, the Inflation Reduction Act will probably pass the Senate and become law. That is not good news for Americans.

The Conservative Treehouse points out some of the changes that were made to the law to get Senator Sinema to agree to vote for it:

Arizona Senator Kyrsten Sinema has announced her support for the senate climate change spending and tax proposal after some modifications to the new taxation.

To support the hedge fund donors, Senator Sinema insisted the carried interest loophole tax provision be removed and instead replaced with a corporate tax on stock buybacks.  Any time a corporation wants to buy back their own shares of stock, they will now pay the U.S. government a tax for doing so; at least that’s the ¹intent.

[¹Note: taxing shares of company stock will never work, because that’s exactly what shell companies were designed to avoid. Set up a child shell company to purchase the stock and the parent company doesn’t pay taxes on the child’s purchase. It’s a shell game]

Additionally, according to reports, there is some kind of agreement to modify the 15% corporate minimum tax. Details unknown. Bottom line, Senator Sinema now supports the $700 billion climate change spending and tax proposal.

The Tax Foundation has an analysis of exactly what the financial impact of the bill will be:

Last-week’s Democrat-sponsored Inflation Reduction Act (IRA), successor to the House-passed Build Back Better Act of late 2021, has been touted by President Biden to, among other things, help reduce the country’s crippling inflation. Using the Tax Foundation’s General Equilibrium Model, we estimate that the Inflation Reduction Act would reduce long-run economic output by about 0.1 percent and eliminate about 30,000 full-time equivalent jobs in the United States. It would also reduce average after-tax incomes for taxpayers across every income quintile over the long run.

By reducing long-run economic growth, this bill may actually worsen inflation by constraining the productive capacity of the economy.

Our analysis contains estimates of the budgetary, economic, and distributional impacts of the Inflation Reduction Act as specified in bill text provided on July 27.

Using the General Equilibrium Model, we estimate that the tax provisions, IRS enforcement, and drug pricing provisions in the bill would increase federal revenues by about $656 billion over the budget window, before accounting for $352 billion in expanded tax credits for individuals and businesses, resulting in a net revenue increase of about $304 billion from 2022 to 2031.

Excluding the anticipated revenue from increased tax compliance and the drug pricing provisions, the bill would lose about $126 billion in revenue over the budget window.

The article includes the following chart:

The bill also includes almost $80 billion in appropriations for the Internal Revenue Service to put toward taxpayer services and enforcement. I suspect those of us in the middle class will feel that change. Even if your taxes are done correctly to the penny, the IRS can make you very uncomfortable. My husband and I experienced that after we donated to the tea party. The next year we were audited. We sent them all the applicable information, and they delayed the case for a year. They couldn’t find anything wrong, but they took a long time admitting that. The IRS does not need more money–it needs to go away and have our tax code replaced by something that people can understand and can fit on one sheet of paper.

 

 

The Impact of President Biden’s Tax Policies

In April 2014, The Tax Foundation reported the following:

The tax code is huge and complex. But how huge and complex is it?

Andrew Grossman, the legislation counsel for the Joint Committee on Taxation that helps write tax laws, attacked us in Slate yesterday for saying that the tax code runs 70,000 pages, countering that it’s “only” 2,600 pages.

So how long is the U.S. tax code really? There are a couple ways to look at it.

Statutes

There’s the literal statutes that Congress has passed (Title 26 of the U.S. Code). The Government Printing Office sells it spread over two volumes, and according to them, book one is 1,404 pages and book two is 1,248 pages, for a total of 2,652 pages. At perhaps 450 words per page, that puts the tax code at well over 1 million words. (By way of comparison, the King James Bible has 788,280 words; War and Peace runs 560,000 words; and the Harry Potter series is just over 1 million words.)

Statutes and Regulations

However, a tax practitioner who relies just on the tax statutes will go to jail, because so much of federal tax law is in IRS regulations, revenue rulings, and other clarifications. Congress will set down a policy and leave it to the IRS to write all the rules to implement it. These regulations aren’t short: the National Taxpayer Advocate did a Microsoft Word word count of the tax statutes and IRS regulations in 2012, and came up with roughly 4 million words. Again at roughly 450 words per page, that comes out to around 9,000 pages. The National Taxpayer Advocate also noted that the tax code changed 4,680 times from 2001 to 2012, an average of once per day.

The tax code is that large and that complex due to the efforts of lobbyists in Washington, D.C. Money talks. Corporations and foreign governments know how to get around laws limiting their gifts (bribes) to Congressmen, and Congressmen know how to earn money through investments in areas of the economy (and other countries) influenced by their decisions. It’s not right, but it is what is.

Yesterday Newsmax posted an article about some recent comments made by former Trump Chief Economist Larry Kudlow about President Biden’s tax proposals.

The article reports:

Former Trump Chief Economist Larry Kudlow says President Joe Biden’s tax plan is an “assault on investment.”

“There’s some pretty tough headwinds ahead if these taxes, which are an assault on investment … and the people they are going to hurt the most are the middle class, the blue collar middle class, [who will bear] 70% of the burden of the corporate tax, which includes the capital gains tax, 70% of that burden falls on the blue-collar middle class. Make no mistake about that Biden rhetoric notwithstanding,” Kudlow on Sunday told John Catsimatidis on his radio show, “The Cats Roundtable ” on WABC 770 AM.

When corporate profits are down that means less investment, less capital, which results in less family income, he explained.

“You’re going to take about 20 to 25 percent of corporate profits down. Now, that means less investment, that means less money to payout wages, that means less money to purchase new machinery and equipment to enhance productivity, and that means family incomes are gonna go down. That’s the cap gains tax, which runs through corporate profits taxes,” said Kudlow.

Because of Biden’s tax plan, over time, the Gross Domestic Product (GDP) will drop 1 percentage point, “this is not good,” he added.

The article concludes:

Under former President Donald Trump’s economic principals “we’re in a boom,” he said.

“This economy is in good shape because right now before new legislation. Tax rates are low, and the regulatory burdens are low, and we still have energy independence,” he said.

Kudlow asked, “Why would you start taxing the daylights out of an economy that is roaring ahead? I don’t get it.”

“Don’t use your ideology from the left to smother this boom for heaven sakes–use common sense,” he said. He continued; this is ideology. This is a progressive left wing ideology tax. The rich redistribute incomes to build up a new great society, a social welfare state, he said.

Hang on to your wallet. Tax and spend is here for at least three more years unless conservatives take over Congress in 2022.