Democrats are selling their newest social spending bill as a panacea for the ailing economy as it confronts crippling inflation, but a new analysis shows the legislation could actually cost tens of thousands of Americans their jobs.
Findings from the Tax Foundation, a nonpartisan group that advocates for lower taxes, show the initiative could eliminate roughly 30,000 full-time positions from the US economy. It would also reduce average after-tax incomes for taxpayers across every income bracket over the long-term.
“By reducing long-run economic growth, this bill may actually worsen inflation by constraining the productive capacity of the economy,” the analysis said.
The initiative, repackaged by Democrats as the Inflation Reduction Act of 2022, would raise an estimated $739 billion over the next decade by increasing IRS funding, establishing a 15% minimum corporate tax targeting companies’ book income, allowing Medicare to negotiate prescription drug costs and closing a popular tax loophole used by private equity and hedge fund managers.
MANCHIN-SCHUMER SPENDING BILL TARGETS TAX LOOPHOLE FAVORED BY INVESTORS
Revenue raised by the policies would go toward initiatives designed to fight climate change and curb pharmaceutical prices, as well as efforts to reduce the nation’s $30 trillion debt. It includes about $433 billion in new spending, while roughly $300 billion of the new revenue raised would go toward paying down the nation’s deficit.
“This is the action the American people have been waiting for. This addresses the problems of today — high health care costs and overall inflation — as well as investments in our energy security for the future,” Biden said Wednesday in a statement.
The Tax Foundation analysis showed the spending bill could generate about $656 billion over the next decade before accounting for the expanded tax credits for individuals and businesses. When factoring those in, the measure would add about $304 billion to the nation’s coffers from 2022 to 2031.
Despite that, the legislation would have little impact on the broader economy, increasing household income by just 0.05% over the next decade. The measure would also reduce the capital stock by about 0.3% and trim wages by close to 0.1%.
The “most damaging” tax provision included in the bill is the 15% minimum tax on book income, according to the Tax Foundation analysts: That levy would reduce GDP, the broadest measure of goods and services produced in the nation, by 0.3% and cause wages to decline by 0.1%. The tax increase on corporations would cost the economy roughly 23,000 jobs.
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It remains unclear whether the legislation will ultimately become law, with Democrats deeply divided over the different tax proposals in the measure. Sen. Kyrsten Sinema, D-Ariz., is a crucial vote in the 50-50 Senate and, in the past, declined to support ending the break for carried interest. A spokesperson for Sinema has said she is still reading the legislation and has not yet made a decision on whether to support it.