Aug 13, 2022
Following House Democrats' passage of the Inflation Reduction Act on Friday, progressives applauded the most significant changes to the federal tax code since 2017, when Republicans' highly regressive and deeply unpopular Tax Cuts and Jobs Act was enthusiastically welcomed by corporations and the wealthy.
"We should use this win as an opportunity to revitalize the fight for economic justice and equality, and continue demanding more."
Morris Pearl, former managing director at the investment firm BlackRock and now chair of the Patriotic Millionaires, called the Inflation Reduction Act (IRA), which President Joe Biden is expected to sign next week, the "biggest win for tax fairness we've seen in decades."
The IRA's 15% minimum tax on corporations with more than $1 billion in profits, 1% excise on stock buybacks, and increased funding for the Internal Revenue Service (IRS) to strengthen enforcement against rampant tax evasion by rich individuals and firms--provisions that would raise more than $700 billion in new revenue over a decade--are strongly supported by voters and mark "a significant step towards achieving economic equality," said Pearl.
But "while this bill establishes desperately needed changes to our tax laws and IRS funding, it is still a far cry from the systemic changes that we need in our society to rectify the hold the rich still have on every level of our economy," Pearl continued.
"We need to take care that we don't let ourselves become complacent," he added. "This is a step forward, but only one step in a long journey. We should use this win as an opportunity to revitalize the fight for economic justice and equality, and continue demanding more."
Pearl's sentiments were shared by others.
The IRA "requires some of the nation's most profitable billionaire corporations and wealthiest citizens to begin to contribute a fairer share of taxes to reduce the costs of essentials for working families and to make critical investments to save our planet from the devastation of climate change," said Frank Clemente, executive director of Americans for Tax Fairness.
Enactment of this legislation "represents a historic rebuke of failed supply-side economics," Clemente added. "Hopefully, it signals an end to 40 years of Congress cutting taxes on the rich and corporations based on the false notion that the benefits will trickle down to working people."
Eileen Appelbaum, co-director of the Center for Economic and Policy Research (CEPR), similarly described the IRA's tax provisions as "a historic turn in tax policy towards greater fairness."
"The near doubling of Internal Revenue Service staff, plus resources to upgrade IT capacity, means the agency will be able to investigate potential tax fraud in complex Wall Street firms," said Appelbaum. "IRS campaigns to crack down on private equity firm's improper use of management fee waivers for investors and monitoring agreements with portfolio companies will no longer be stymied by a lack of resources."
In other respects, however, Wall Street tycoons got off easy, thanks to right-wing Democratic Sen. Kyrsten Sinema (Ariz.), a top recipient of political cash from and staunch ally of the investor class.
Empowered by the indispensable nature of her vote in the evenly split Senate, Sinema made her support for the IRA contingent on the preservation of the so-called "carried interest loophole"--which benefits hedge fund managers and private equity moguls by allowing their investment income to be taxed at the long-term capital gains rate of around 20% rather than the ordinary top income rate of 37%--and the exemption of private equity-owned companies from the 15% minimum tax on billion-dollar firms.
New Federal Election Commission filings show that Sinema has received more than $500,000 in campaign donations from private equity executives during the current election cycle, and according to OpenSecrets, the securities and investment sector as a whole has contributed more than $2.2 million to Sinema since she was elected to the Senate in 2017.
According to the Institute on Taxation and Economic Policy (ITEP), Sinema's carve-out for private equity-owned corporations reduced the revenue impact of the IRA by $35 billion, and her move to tank her party's modest proposal to reform the carried interest loophole--by increasing the holding period for investments to qualify for preferential tax treatment from three to five years--cost $14 billion.
Regarding Wall Street's ability to secure nearly $50 billion in savings through Sinema, CEPR senior economist Dean Baker told the Associated Press on Saturday that "it's pretty rare you see this direct of a return on your investment."
Despite the last-minute changes won by Sinema on behalf of her private equity donors, Appelbaum said that "the IRA made a historic breakthrough in taxing the wealthy and encouraging good behavior."
"Top executives of publicly traded companies," for instance, "will face a 1% tax on stock buybacks when they use company profits to increase the company's share price and enrich themselves instead of investing in technology, training, and raising workers' wages," said Appelbaum.
ITEP executive director Amy Hanauer, meanwhile, said: "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 healthcare, and reduce the deficit. Everyone in this country should be proud of this enormous policy accomplishment."
Although analysts say the IRA won't raise taxes on the 98.2% of U.S. households that earn $400,000 or less per year, not a single Republican in the House or Senate voted for the legislation, which passed through the filibuster-proof reconciliation process.
\u201cEvery Republican just voted *against* enabling Medicare to negotiate and lower drug prices, empowering the IRS to go after super-rich tax dodgers, and taxing profitable corporations to invest in the people.\n\nAnd they call themselves the party of the working class?\u201d— Robert Reich (@Robert Reich) 1660342515
Mark Weisbrot, co-director of CEPR, said that "the historic nature of this moment is also seen in the Republican Party's unanimous opposition to the bill, and their failure to even put forth any alternative."
Instead, GOP lawmakers have railed against the bill's provision of nearly $80 billion in new IRS funding--telling ludicrous lies about how money intended to help the agency crack down on wealthy tax cheats will be used to hire "87,000 new agents" to harass working people at their homes. Rep. Lauren Boebert (R-Colo.) on Friday went so far as to claim that Democrats are "using the power of the federal government for armed robbery!"
In response, Rep. John Yarmuth (D-Ky.) said, "I know that Ms. Boebert would like everybody to be armed, as they are in her restaurant, but that's not what IRS agents do."
As ProPublica has documented, the IRS does now audit low-income taxpayers at the same rate as the top 1%, but that is a direct result of years of budget cuts that have undermined the agency's ability to audit the rich.
The IRA's boost in IRS funding seeks to rectify this injustice. Given that Treasury Secretary Janet Yellen has instructed the agency not to use any new resources to increase audits of people making less than $400,000 per year, the GOP's disingenuous attack, critics say, is a thinly veiled attempt to shield their wealthy benefactors.
\u201cGuess who wins when Republicans whip up fear over the IRS restoring its depleted workforce?\n\nThe rich people the IRS is *actually* coming after who keep cheating on their taxes. We need a strong IRS to make them pay what they owe!\u201d— Americans For Tax Fairness (@Americans For Tax Fairness) 1660409656
Public Citizen president Robert Weissman argued that Republicans "should be forced to answer the question: Why? Why did you vote against drug price relief for seniors? Why did you vote against making large companies pay at least some of their taxes? Why did you vote against health care affordability? Why did you vote against incentives--no regulations, just incentives--to spur renewable energy?"
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