Americans of all incomes would see their federal taxes rise under the climate and health care package that was negotiated last week between Senate Majority Leader Chuck Schumer and moderate Democratic Sen. Joe Manchin, according to data from the nonpartisan Joint Committee on Taxation released Saturday by Republicans on the Senate Finance Committee.
However, the analysis takes into account the indirect effect of the bill’s provision to impose a 15% minimum tax on certain corporations. Economists assume companies would then pass along part of their tax increase to employees by reducing their after-tax wages and job opportunities. Also, shareholders would take a hit since the value of their stock holdings, including those held in pensions and mutual funds, would likely decline.
The minimum tax measure is expected to raise $313 billion over a decade, according to the JCT.
Republicans are pointing to the report as proof that the package, which Democrats hope to push through the evenly divided Senate through the reconciliation process so they wouldn’t need any GOP votes, would violate the pledge by President Joe Biden and congressional Democrats not to raise taxes on those earning less than $400,000.
But that’s a “bogus argument,” said Steve Rosenthal, senior fellow at the nonpartisan Tax Policy Center, calling it “more of a gotcha kind of thing.” The President and Democratic leaders have promised not to directly raise taxes on Americans earning below that threshold, he said.
Analyses of some of Biden and the party’s previous proposals to hike corporate taxes also showed an indirect effect on people across the income scale. However, the Build Back Better package that the House passed last year included provisions such as the enhanced child tax credit, which would have aided lower- and moderate-income families.
What the JCT found
Federal taxes would increase by $16.7 billion on American taxpayers earning less than $200,000 next year, according to the JCT. And those making between $200,000 and $500,000 would see their levy jump by $14.1 billion. Those with incomes above half-a-million dollars would be hit with a $23.5 billion increase.
By 2031, when the new energy credits and subsidies are set to provide an even greater benefit to higher-income Americans, those earning below $400,000 are projected to pay as much as two-thirds of the additional tax revenue collected that year, according to the Republicans on the Senate Finance Committee.
It’s standard procedure for the JCT to allocate the additional corporate levies to employees and shareholders of all income levels.
“You have to distribute the corporate tax burden to somebody,” said William McBride, vice president of federal tax and economic policy at the Tax Foundation. “It falls on a mixture of [stock] owners and workers, and those are all over the income scale.”
Manchin argued Sunday on CNN that the bill is “not putting a burden on any taxpayers whatsoever.”
He also took issue with a preliminary analysis by the Penn Wharton Budget Model that showed that the package “would very slightly increase inflation until 2024 and decrease inflation thereafter.”
“Well, we found that they were wrong. And people can be wrong, but how in the world can it be inflammatory?” he told CNN’s Jake Tapper on “State of the Union.” “How can it add flames to inflation fires right now if you’re paying down debt?”
He added: “We’re doing everything we can to make sure we attack the problem. And these are solutions to the problems we have. So I know the ones playing politics with it.”