Amy Hanauer, Executive Director of the Institute on Taxation and Economic Policy, issued the following statement on “The Inflation Reduction Act (IRA) of 2022,” the reconciliation bill passed today by the House of Representatives.
“Today Congress signed off on the biggest corporate tax reform in decades as part of a bill that will provide a more equitable country and more sustainable planet to future generations. The IRA reduces corporate loopholes, cracks down on tax evasion by the wealthy and devotes much of the resulting revenue to greening our economy. Our nation will use the hundreds of billions of dollars this bill will raise over the next decade to tackle climate change, speed up clean energy initiatives, boost green jobs, fund health care and reduce the deficit. Everyone in this country should be proud of this enormous policy accomplishment.”
The 15 percent minimum tax for wealthy corporations with more than $1 billion in profits, the biggest revenue-raising provision in the bill, will address the problem of corporate tax avoidance that ITEP has documented for decades. President Biden frequently cites ITEP’s conclusion that 55 large, profitable corporations paid no federal income taxes in 2020, at the height of the pandemic. Had this new bill been on the books in 2020, many of the biggest moneymakers on Wall Street could have paid more, according to a 2021 report from Sen. Elizabeth’s Warren’s office using ITEP data.
While the corporate minimum tax was weakened by a few last-minute carveouts – one for private equity firms and another that will continue to allow accelerated depreciation – it will nonetheless address some of the most significant tax avoidance by the largest corporations in the world.
“Ensuring the biggest corporations in this nation pay a minimum amount of tax is a no-brainer,” Hanauer continued. “There is absolutely no reason that some companies should be able to game the system while others are paying their fair share. The IRA will help get us to a more level playing field.”
The bill will also restore $80 billion in funding to the IRS, which will more than pay for itself. As ITEP has explained, years of budget cuts have caused the IRS to reduce its audits of very large corporations in half and reduce its audits of millionaires by even more.
“Even those opposed to changing our tax laws should agree with the commonsense notion that corporations and the richest Americans should follow tax laws already on the books. This proposal gives the IRS the tools to ensure that happens,” continued Hanauer.
The bill also extends a provision preventing well-off individuals from claiming they have no income because of business losses that exist only on paper and creates a 1 percent tax on corporations’ buybacks of their own stock.
“The stock buyback provision will also make the country’s tax code fairer by ensuring that income transferred from corporations to wealthy shareholders does not continue to escape taxation,” Hanauer concluded.