No surprise - Dem bill improves things, reduces deficit, and GOPs BS about it

The Congressional Budget Office has weighed in on the Dems' Senate bill that would go after tax dodging corporations and individuals, while lowering insurance and drug costs and expanding some green energy initiatives. And CBO says it would improve the country's fiscal situation.

Democrats’ plan would decrease deficit by more than $100B: CBO https://t.co/gPVxswRxfH pic.twitter.com/NSKTIx6XAG

— The Hill (@thehill) August 3, 2022

The Congressional Budget Office (CBO) on Wednesday released estimates for Democrats’ sprawling reconciliation plan, forecasting the legislation would lead to a net deficit decrease of more than $100 billion over roughly the next decade.

The estimates from the nonpartisan budget scorekeeper come as Democrats are moving quickly to pass the mammoth bill, dubbed the Inflation Reduction Act, later this week.

But I thought Dems were saying this would cut the deficit by $300 billion? So what gives?

“CBO expects that the provisions in title I that would increase funding for tax enforcement activities also would increase revenues,” the CBO said. “However, under guidelines agreed to by the legislative and executive branches, that change is not included in this cost estimate, although it would be reflected in CBO’s baseline budget projections after the legislation was enacted.”

However, the CBO noted in its report that, as “a result of those increases in outlays, revenues would increase by $204 billion over the 2022-2031 period,” eventually cutting the deficit by more than $300 billion in total.

Ah, that makes more sense. Although why you wouldn't score something that would happen doesn't make a lot of sense.

But WisGOP thinks it has a way to attack the Inflation Reduction Act, and is trying to tie it to someone who hopes to be Senator - Mandela Barnes.

The latest Barnes-backed spending boondoggle would increase the tax rate paid by nearly all taxpayers, including a $17 billion tax hike on taxpayers earning less than $200,000....

I'll spare you the rest of WisGOP's word salad, but where is this "tax increase" argument coming from? William Gale at the Tax Policy Center (TPC) explains it for us, pointing out that the Joint Committee on Taxation (JCT) says 1/4 of the increased taxes and costs from the minimum corporate tax will be paid by workers over corporations.

The labor portion in JCT’s model is relatively small compared to the burden faced by shareholders. But it’s enough to make the JCT distributional tables reflect tax increases among nearly all income groups in a bill where a corporate tax increase is the primary revenue source.

I'll also note that the TPC immediately follows that up by saying the JCT isn't dealing with the reality of how big, tax-dodging corporations do things.

However, a more careful look at how corporate taxes work today calls into question the estimated changes in federal taxes for middle- and lower-income households. In analyzing corporate taxes, JCT does not distinguish between “normal” and “super-normal” returns. Normal returns can be thought of as the minimum risk-adjusted return necessary for a firm to make an investment. Taxing normal returns can deter business investment and reduce hiring and wages. On the other hand, super-normal returns—often called rents, excess retu>rns, or excess profits—comprise any returns above the normal returns a business could expect. Firms may earn super-normal returns through patents, special expertise, outsized influence in product or labor markets, or just simple luck. A tax below 100% on excess returns should still leave the firm with some remaining super-normal profit and be less likely to affect investment or hiring than a tax on normal returns. In that case, standard analysis assumes that the tax on excess returns is borne by shareholders. In fact, some studies show that 60 percent or more of the corporate tax base is made up of super-normal profits.

Distinguishing between normal and super-normal returns is especially important here since the corporate minimum tax under discussion would only apply to firms with $1 billion or more in profits. Given their financial status, it’s quite possible the businesses impacted are more likely to be earning excess or super-normal returns.

And I'd take that one step further - the type of corporation susceptible to this minimum tax is the type of place that does large amounts of share buybacks, outsourcing, and other greed tricks that have taken funds away from everyday American workers. Once those corporations have to pay taxes on their profits, they might be more likely to want to expand and invest in their business, instead of wasting time and energy on less productive measures and tax dodges.

And let me remind you that this package of deficit reduction and relief from higher costs for everyday Americans comes on top of the US budget deficit already being at its lowest point in 5 years.

Let's not kid ourselves about who really is the fiscally responsible party in DC. And while the IRA is far from everything we need, it would still be an improvement over what we've got.