Inflation Reduction Act gets through, with good things for real people...and the US budget!

After an absurd all-night and morning session over the weekend, the Senate finally finished their dumb procedure that allows for 51 votes to actually win the day over 50 votes.

PASSED! The Senate Democratic majority advanced the Inflation Reduction Act: making billionaire corporations pay a minimum tax to fund historic investments in clean energy and lower costs.

Every Senate Republican sided with corporate special interests and against this bill.

— Elizabeth Warren (@SenWarren) August 7, 2022

So let’s review some of the items in the Inflation Reduction Act.

The bill would allow Medicare to negotiate prescription drug prices – long opposed by the pharmaceutical industry – and extend Affordable Care Act subsidies three more years through 2025.

To address climate change, the bill includes $10 billion in tax credits to build electric vehicles, solar panels and wind turbines; $7,500 tax credit rebates for consumers to buy electric vehicles; and $9 billion for energy-efficient home retrofits for low-income Americans.

There's up to $20 billion for loans to support electric vehicle plants, $20 billion to assist farmers and ranchers with climate change and $30 billion for cities and states to transition utilities to clean electricity.

Oh, but SPENDING, Jake! SPENDING!

For those of you who are so economically illiterate that you think our inflation is caused by debt, good news! These measures are paid for, and then some.

To pay for these and other measures, the bill would establish a 15% corporate minimum tax and beef up enforcement of the Internal Revenue Service.

The bill would raise about $739 billion in tax revenue, more than offsetting the $433 billion in proposed spending. The legislation would decrease the federal deficit by $102 billion over the next decade, according to the Congressional Budget Office.

If you’re thinking the math of $739 billion in taxes - $433 billion in spending doesn’t add up, you’re not alone. Let me remind you that the CBO admitted it left some of the budget effects out of its analysis.

CBO expects that the provisions in title I that would increase funding for tax enforcement activities also would increase revenues. 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….CBO estimates that as a result of those increases in outlays, revenues would increase by $204 billion over the 2022-2031 period.

It’ll be hilarious to see WisGOP Congressmen like Tom Tiffany, Glenn Grothman and Scott Fitzgerald all whine about extra tax enforcers when the House takes up this bill. That’s because they all voted for Scott Walker’s 2013-15 budget that raised tens of millions by…hiring extra agents at the Wisconsin Department of Revenue to go after tax cheats.

Interestingly, the CBO also responded to some (leading) questions from Sen. Lindsey Graham by saying that overall inflation wouldn’t be affected much by the Inflation Reduction Act. But I’ll explain in a second why this type of analysis is largely BS.

In calendar year 2022, enacting the bill would have a negligible effect on inflation, in CBO’s assessment. In calendar year 2023, inflation would probably be between 0.1 percentage point lower and 0.1 percentage point higher under the bill than it would be under current law, CBO estimates. That range of likely outcomes reflects uncertainty about how various provisions of the bill would affect overall demand and output, the supply of labor, the persistence of disruptions in the supply of goods and services, and how the Federal Reserve would respond to offset any increase in inflationary pressure. Responsiveness to the enhancement of health insurance subsidies established by the Affordable Care Act is the most important factor boosting inflationary pressure, and responsiveness to the new alternative minimum tax on corporations is the most important factor reducing inflationary pressure. The range applies to multiple measures of inflation: the GDP price index, the personal consumption expenditures price index, and the consumer price index for all urban consumers….

CBO expects different provisions of the legislation to affect overall demand and output differently. For example, provisions that directly increase government purchases of goods and services would add to overall demand on a dollar-for-dollar basis. Increases in financial support to people, such as through enhanced health insurance subsidies, would boost spending more among lower-income people than among higher-income people, partly because lower-income households typically consume a higher fraction of their additional disposable income than higher-income households do. Thus, financial assistance to lower-income households would boost the overall demand for goods and services more than financial assistance to higher-income households would. Changes to business taxes that affect after-tax profits on past investments—as opposed to the return on new investments—would have relatively small effects on overall demand, in CBO’s assessment.

This is a typical GOP trick that they’ve pulled for years with Obamacare. The claim is that increases in subsidies raise costs and inflation, because the total amount paid for the service may be more. But consumers aren’t the ones paying that, and in fact are paying less. And shouldn’t that be what we care about, if the deficit is being reduced at the same time?

How much they personally end up paying is what typical Americans care more about. And many Americans would pay less for drugs (especially if they are on Medicare), less for health insurance, and get help in making energy-efficiency moves that save money down the road.

Then the “cost” is in making corporations that have $1 billion in profits pay a minimum tax rate? Like real people have to? Seems like a win-win to me. It also puts a 1% excise tax on the economically wasteful and regressive tactic of stock buybacks.

Corporations have increasingly used stock buybacks to benefit their shareholders while avoiding taxes. In the first year after the Republican’s 2017 tax reform bill, corporations repurchased a record $1 trillion in their own stocks. https://t.co/IkcX42lMCc

— ITEP (@iteptweets) August 5, 2022

As I’ve mentioned before, we shouldn't expect or demand this bill to be the magic pill that solves the climate crisis or immediately turn around the crippling inequalities that have resulted from 40 years of giveaways to the rich and corporate. It won’t be. But it’ll make us a lot better than we were, and if Dems build upon this success with more wins in 3 months, it allows for us to go further.

So let’s have the House pound this thing through at the end of this week, don’t mess around and try to get everything at once with amendments. Take the surprising win with the Inflation Reduction Act, and move on from there.