Another Broken Biden Promise: Democrat's 'Inflation Reduction Act' Will Do the Opposite, and Increase Taxes for Most


So much for his campaign promise to not increases taxes on people making under $400,000

By David R. Henderson

 
“Nothing in this subsection is intended to increase taxes on any taxpayer with a taxable income below $400,000.”
 
This statement comes from page 39 of the so-called “Inflation Reduction Act of 2022.” That’s the act that Democratic West Virginia Senator Joe Manchin agreed to support because he has been persuaded that somehow raising taxes and having government spend more money will reduce inflation.
 
It won’t.
 
Inflation is caused by too much money chasing too few goods. That means there are only two ways to reduce inflation:
 
  1. Reduce the growth rate of the money supply, or
  2. Increase the growth rate of the economy.
The act would do neither.

In fact, by raising taxes and diverting resources from the productive private sector to the inefficient government sector, the act would reduce economy growth.
 
Back to the quote above from the act.

It’s simply a promise that the beefed-up IRS won’t use its new resources to go after people making under $400,000. But the corporate tax provisions elsewhere in the bill absolutely will increase taxes for most people making under $400,000.
 
The U.S. Congress’s Joint Committee on Taxation estimates that for every $100 in taxes on corporations, owners of capital (shareholders) pay $75 and workers pay $25.
 
Do you know any workers? More important, do you know any shareholders who make less than $400,000 a year in taxable income? I do. I'm one of them.
 
Fortunately, the Joint Committee on Taxation (JCT) has done its job, estimating the increase in taxes for people in each income group.
 
The $54.3 billion tax increase for 2023, the JCT estimates, won’t increase taxes for anyone with income between $0 and $30,000. But the JCT also points out that its measure of income includes not just adjusted gross income but also employer contributions to health insurance, the employer’s share of the Social Security tax (FICA), and the insurance value of Medicare benefits.

So millions of people whose adjusted gross income is below $30,000 will pay somewhat higher taxes.
 
People with income up to $75,000 won’t pay much more. But people with income between $75,000 to $100,000 will see their average tax rate rise from 15.8% to 16.0%.

The average tax rate for people with income between $100,000 and $200,000 will rise from 19.1% to 19.4%, and between $200,000 and $500,000 will rise from 24.1% to 24.4%.
 
President Biden is eager to sign this bill, assuming it passes.

So much for his campaign promise not to increases taxes on people making under $400,000.

Today's Institute for Policy Innovation TaxByte was written by David R. Henderson, a research fellow with the Hoover Institution at Stanford UniversityHe was previously a senior economist for health policy and for energy policy with President Reagan's Council of Economic Advisers. 










 
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