Inflation Reduction Act Will Increase Tax Fairness, Reduce Inequality
news releaseAmy 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 Senate.
“Today we made remarkable progress for America’s tax and climate policy. The IRA reduces corporate loopholes, collects revenue from those who defy tax law, and devotes much of that revenue to greening our economy. The hundreds of billions of dollars this bill will raise over the next decade will tackle climate change, speed up clean energy initiatives, boost green jobs, fund health care and reduce the deficit. In all, the IRA will begin to create a more equitable America and a more sustainable planet.”
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 would have paid more, according to a 2021 report from Sen. Elizabeth’s Warren’s office using ITEP data.
“Ensuring the wealthiest 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 also includes President Biden’s proposal to restore $80 billion of the enforcement budget that has been cut from the IRS over the past decade, 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 includes a 1 percent tax on corporations repurchasing their own stock. This proposal was included in the House-passed Build Back Better Act last year and is projected to raise $74 billion over 10 years (see an earlier ITEP analysis of that proposal here).
“The stock buyback provision added to the IRA this week would 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.