However, the analysis takes into account the indirect effect of the draft provision to impose a minimum tax of 15% on certain corporations. Economists assume that companies will pass some of the tax increase on to employees by reducing their after-tax wages and job opportunities. In addition, shareholders would take a hit as the value of their equity holdings, including those held in pensions and mutual funds, would likely decline.
The minimum tax measure is expected to raise $313 billion over a decade, according to the JCT.
Republicans point to the report as evidence that the package, which Democrats hope to push the evenly divided Senate through the reconciliation process so that it does not need a GOP vote, would violate a pledge by President Joe Biden and congressional Democrats not to consider tax on those earning less than $400,000.
But that’s a “bogus argument,” said Steve Rosenthal, a senior fellow at the nonpartisan Tax Policy Center, calling it “more of a hit-and-miss kind of thing.” The president and Democratic leaders have promised not to directly raise taxes on Americans who earn below that threshold, he said.
Analyzes of some of Biden’s and the party’s previous proposals to raise corporate taxes also showed a knock-on effect on people across the income spectrum. However, the Build Back Better package that the House passed last year included provisions such as the enhanced child tax credit, which would have helped low- and moderate-income families.
What did the JCT find?
According to the JCT, federal taxes would increase by $16.7 billion on American taxpayers earning less than $200,000 next year. And those earning between $200,000 and $500,000 would see their rate increase by $14.1 billion. Those with incomes above half a billion dollars would be hit with a $23.5 billion increase.
In 2031, when new energy credits and subsidies provide an even bigger benefit to higher-income Americans, those making less than $400,000 are projected to pay up to two-thirds of the additional tax revenue collected this year. according to Republicans on the Senate Finance Committee.
It is standard procedure for the JCT to allocate additional corporate rates to employees and shareholders of all income levels.
“You have to distribute the corporate tax burden to somebody,” said William McBride, vice president of federal fiscal and economic policy at the Tax Foundation. “It falls into a mix of [stock] owners and workers, and they’re all over the income scale.”
Effects of inflation
Manchin argued on CNN Sunday that the bill “doesn’t place a burden on any taxpayer.”
He also criticized a preliminary Penn Wharton budget modeling analysis that showed the package would “increase inflation very slightly through 2024 and decrease inflation thereafter.”
“Well, we found out they were wrong. And people can be wrong, but how can it be inflammatory?” he told CNN’s Jake Tapper on “State of the Union.” “How can you add flames to the fires of inflation right now if you’re paying down debt?”
He added: “We’re doing everything we can to make sure we attack the problem. And these are solutions to the problems we have. So I know those who are playing politics with this.”
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