The Democrats are masters of misnaming the intended purpose of bills they offer up to disguise what is really happening. It is indicative of how gullible they believe we are. The Inflation Reduction Act of 2022 will do nothing of the such. The main reason is that revenues will not be achieved to offset the expenditures.
This column has a ban on using definitive terminology. I do not use words like Never, Always or Every. That is because those terms are rarely applicable. However here is a truism. Whenever there is a projection of revenues that will be produced from a new tax increase, they never come to fruition. Here is another truism. Whenever there is a reduction of tax rates, they always produce increased governmental revenues. I know this because I have both studied and written about it for over 40 years.
This ridiculously named bill has a few major elements of the supposed increase in revenue. Please do not believe the eventual scoring by the Congressional Budget Office (CBO). The CBO is rarely correct because they do their scoring based on whatever Congress tells them to do. Just think about this: if Schumer named this bill which he did, do you think he gave the CBO realistic numbers on which to do a projection?
The first element of this bill’s increased revenues has to do with money flowing in from audits because of new hires at the IRS. This is an agency that cannot even answer their phones. This is an agency that cannot even process their tax returns – the current estimate is they are twenty million behind, but who really knows? I believe they have finally processed all the 2020 tax returns. They are now digging into the unprocessed 2021 returns. This is an agency that is currently auditing a client of mine and they are having a problem because neither the computer of the auditor nor his supervisor can read a thumb drive I sent them. They cannot read any thumb drives.
Yes, the IRS needs an increased budget to tackle their basic problems which includes a wholly inadequate computer system. Agents communicate this regularly. It is compounded by allowing agents to work from home which has significantly impacted the IRS production because of these inadequate systems. If the system does not work well when they are sitting in front of their office screens, how well do you think they operate remotely?
Until they fix these problems, how are they going to hire a slew of new people to perform audits? And where are they getting all these new personnel to work at the most reviled agency in the country? We cannot get people to work at our restaurants, car repair shops or appliance stores. So how is the IRS going to get qualified personnel to work their audits? How many people graduating college with an accounting degree are going to work for the IRS when there is a shortage of personnel at accounting firms with a much more attractive environment and future. They may be able to hire people with sociology or geography degrees who can only get jobs as bartenders. How long do you think it will take them to get prepared to audit your tax return? How long to audit Amazon’s?
I can say if you should get audited by these people, the process will take at least twice as long as it should because they will be inexperienced. A professional CPA will need to walk them through everything about which they have no clue. So, you tell me, is this $80 billion spent over the next ten years going to bring in an additional $204 billion from all those supposed tax cheats out there? And will spending an additional $8 billion a year on the IRS for the next ten years do anything to reduce inflation in 2022, 2023 or 2024? I think you know that answer.
Then there is the big lie of this bill. It repeals the Trump “rebate rule.” This was a vague rule that has to do with Medicare Part D that was never implemented by Trump, has not been implemented by Biden and a regulation never going into effect. This is a magical savings of $120 billion that was never implemented and thus becomes “mystery savings.”
Last, we must confront the corporate minimum tax of 15%. Sounds nice. I have read a substantial number of the analyses of these corporations who supposedly pay no taxes. We hear this kind of malarkey all the time. I will get a call from a client. They will tell me they spoke to someone, and they were paying no taxes. “Why am I paying so much?” My answer is always they are full of ———. You fill in the blank. Then I tell them to get a copy of the tax return for analysis. And that is the problem, the Left-wing analyses of these “non-paying entities” never includes a full analysis of the reasons why these entities are not paying taxes.
They may be getting research credits which Congress created to encourage companies to spend money on research and development with the idea that these companies will maintain or increase their position to be competitive in the world economy. They may be buying Low Income Housing Tax Credits which encourages the development of affordable housing. They may be getting credits for tax paid to foreign countries based on income made in foreign countries just like you may be getting on your investments. If we limit that tax offset, these companies will be paying a lot more than a minimum tax of 15% since they pay tax in America on their worldwide income.
This is the ultimate act of industrial policy initiated by the Democrats. They are throwing money at the computer chip industry and anybody who spends money on their questionable green policies. They want to pay for it by reducing deductions at a group of other companies. Those companies have been allowed to deduct the expense for new equipment and other purchases as opposed to writing them off over seven years or more. That encourages those companies to expand, improve efficiency and safety and hire more Americans. These tax and spend plans used to steal the money directly from you and me. Now they have lurched into full bore Socialistic government planning policy as if that has worked anywhere.
Remember the age-old truism. Corporations do not pay taxes; they just pass the tax onto their customers or cut jobs.
And the fact that a large portion of the tax increase will come from a group President Biden has stated he would not raise taxes on – those couples making under $400,000 a year. Senators Schumer and Manchin said nothing about that.
The Democrats got their wish with new spending of over to $750 billion between the Chips bill and the Inflation Will Continue Unabated Bill. They are never going to get their revenue offset. Mr. Manchin, how naïve you must be.