Amy Hanauer, Executive Director of the Institute on Taxation and Economic Policy, issued the following statement on “The Inflation Reduction Act of 2022,” the reconciliation bill announced yesterday by Senate Democrats.
“This is a transformational change for U.S. tax and energy policy. The bill restores sorely needed and long-overdue accountability to our tax code. By ensuring that all corporations pay at least 15 percent of their profits in taxes, providing funding to the IRS to improve tax enforcement and reduce tax evasion, and funding clean energy and emission reductions, this bill would begin creating a more equitable America and a more sustainable planet. We call on every member of Congress to support this pathbreaking legislation.”
The bill 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 15 percent minimum tax for corporations, the biggest revenue-raising provision in the bill, would address the problem of corporate tax avoidance that ITEP has documented for years. 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.
The tax law enacted by President Trump and Republicans in Congress in 2017 did nothing to address corporate tax avoidance. ITEP found many companies that were profitable each year from 2018 through 2020, the first three years that the 2017 tax law was in effect, either paid no federal income taxes during that time or paid an effective rate of 10 percent or less. A report from Sen. Elizabeth’s Warren’s office using ITEP data shows that the 15 percent minimum tax will limit the special breaks and loopholes these corporations use to avoid paying taxes.
“In other words, Biden’s tax reform will succeed where Trump’s failed,” Hanauer concluded.