The Senate has voted to pass the Inflation Reduction Act, and it's sent to the house.
The bill calls for a $433 billion investment to secure $739 billion in revenue for a net deficit reduction of $300+ billion, according to Senate Democrats.
Electric vehicle tax credit
$7,500 electric vehicle tax credit, which is renewed starting in January 2023 and will last a decade – until the end of 2032.
The previous tax credit had a cap of 200,000 cars per manufacturer, a limit that many manufacturers surpassed years ago.
Minimum Corporate Tax
Companies with at least $1 billion in income would be required to calculate their annual tax liability two ways: one using longstanding tax accounting methods, which is 21% of profits less deductions and credits; the other by applying the 15% rate to the earnings they report to shareholders on their financial statements, commonly known as book income. Whichever amount is greater would be what they owe.
Nearly $80 billion for IRS including enforcement and audits.
The Inflation Reduction Act allocates $79.6 billion to the agency over the next 10 years. More than half of the money is meant for enforcement, with the IRS aiming to collect more from corporate and high-net-worth tax dodgers.
Stock buyback tax
The IRA plans to impose a 1% excise tax on corporate buybacks. This would be a clear tax on capital.
From a macroeconomic perspective, the plan is going to discourage large corporations from reinvesting in many areas to expand their operations or employee retention because of the huge burden of taxes they need to take into considerations, I'm doubtful that this plan would have any direct impact on reducing the historic inflation number, especially when the monetary policy is trying to achieve a soft landing, I see this plan would make it harder for the fed to achieve that because the IRA will slow the economy even more by punishing successful businesses instead of giving them incentives to grow.
but from a tax revenue perspective, it is a good progress for America’s tax and climate policy. The IRA will generate more revenue from the big corporation and devotes much of that revenue to greening our economy. The hundreds of billions of dollars this bill will raise over the next decade will tackle climate change, speed up clean energy initiatives, boost green jobs, fund health care and will help reduce a little of the deficit.
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