President Biden and Congressional Democrats spent their way into an inflation crisis and are now prepared to tax the American economy into a recession.
Senate Democrats, including Sen. Joe Manchin (D-W.Va.), reportedly reached a deal on Wednesday to advance a reckless tax and spending package that would raise roughly $740 billion in revenue and increase spending by $433 billion.
Below are five tax increases included in the bill accompanied by revenue estimates taken from Senate Democrats’ own summary.
15 Percent Corporate Minimum (Book) Tax – $313 Billion
Democrats are pushing a 15 percent corporate alternative minimum tax on the financial statement income of American businesses reporting $1 billion in profits for the past 3 years.
This idea is based on the false premise that corporations exploit tax loopholes to pay zero income tax every year. In reality, businesses utilize legal tax deductions that Congress intended for them to take in order to foster growth, investment, and job creation.
While Democrats claim they are only targeting large, profitable corporations, the cost of these tax increases will be borne by working families in the form of higher prices, fewer jobs, and lower wages. A Tax Foundation report from last December found a 15 percent book tax would reduce GDP by 0.1 percent and kill 27,000 jobs.
Tax Foundation also warned that current supply chain issues could be worsened by the book tax’s disproportionate burden on key industries. The report concluded that “the coal industry faces the heaviest burden of the book minimum tax, facing a net tax hike of 7.2 percent of its pretax book income, followed by automobile and truck manufacturing, which faces a 5.1 percent tax hike.”
95 Percent Tax on Prescription-Drugs to Force Price Controls – $288 Billion
Democrats would impose a 95 percent excise tax on prescription drugs unless drug manufacturers accept government-set prices.
In reality, all drug manufacturers would accept the price controls or stop selling the drug in the U.S. market entirely rather than pay the 95 percent tax. Revenue would be generated from Medicare savings from reduced prescription-drug costs. Yet these “savings” wouldn’t begin until 2026, fueling concerns that budget gimmicks are allowing Democrats to increase spending now for promised offsets later.
This provision would also restrict medical innovation and limit the supply of new medicines available. Price controls never work because they cause supply shortages. CBO warned the reduction in manufacturers’ revenue could be as high as $1 trillion over the next ten years and would “lower spending on research and development and thus reduce the introduction of new drugs.”
The CBO further stresses the “uncertainty” in assessing the number of new medicines that would be prevented from coming to market. The agency already revised its original assessment to increase the number of drugs prevented from being introduced by 50 percent.
Supersizing the IRS to Increase Audits – $124 Billion
The bill would spend $80 billion beefing up the IRS. The proposal would give the IRS unlimited authority to hire 87,000 additional IRS agents to ramp up audits on small businesses and taxpayers. The IRS would perform an additional 1.2 million annual audits under the plan. Democrats claim the increased spending on enforcement would net $124 billion.
In their plan, Democrats spend 14 times as much money for enforcement — such as small business audits — than for “taxpayer services” — such as answering the phone. IRS employees only answer the phone “19 or 20 percent” of the time.
Carried Interest Capital Gains – $14 Billion
While the Left labels carried interest as a “loophole” it is actually based on longstanding tax principles. Raising taxes on carried interest capital gains should be rejected. It is a terrible tax policy that would harm economic growth, reduce jobs, and reduce the returns of public pension funds across the country.
Sen. Kyrsten Sinema (D-Ariz.) has previously opposed increasing taxes on carried interest capital gains, according to reporting.
This tax hike would hit private equity, venture capital, real estate partnerships, and their portfolio companies which together account for over 25 million American jobs. In response, firms would downsize and decrease investment, causing both a loss of jobs and a reduction in the returns investors see.
Natural Gas Tax – $8 Billion (From CBO score of House-passed reconciliation)
The legislation would impose a regressive tax on oil and gas development based upon emission levels of methane during production, leading to higher energy bills for consumers and higher costs of everyday products.
A letter to Congress from the American Gas Association warned that the methane tax would amount to a 17% increase on an average family’s natural gas bill. Democrats have included a tax in the bill despite retail prices for energy surpassing multi-year highs in the United States.
The new tax would be phased in, beginning at $900/ton of methane emissions in 2023 and rising to $1,500/ton for emissions reported in 2025. These levels are unchanged from the House-passed version of reconciliation that was scored by the CBO.