Quick Notes on a Big Biden Win August 2022 Version

I wanted to make a few comments about the recently passed Inflation Reduction Act:

The trick was finding out which trade-offs the Senatorial logjammers like Joe Manchin and Kyrsten Sinema were willing to take in order for President Biden's agenda see moderate gains. As I noted before, there are few political forces as damaging as a self-serving Senator and Manchin had disrupted efforts at a massive liberal federal budget before. This time around, Majority Leader Schumer (and likely some back-room dealing from Biden) found out what Manchin's (and then Sinema's, which was apparently more money for drought rescue in her state) asking price was and got it done.

We should note that not everything the majority of Democrats wanted is in this bill, but as always there is still time for individual bills tackling those issues to get passed before the November midterms.

The optics on this passing the Senate can't be understated. For once in a long time, the Democratic Party does not look like it's in disarray and warring among its ranks. True, the factions persist - and the Far Left progressives like Bernie Sanders are upset they didn't get a "perfect" bill passed - but this Democratic-led Senate (and next up, a Democratic-led House effectively whipped into line by Speaker Pelosi) was able to get something done that the Republicans couldn't do the last time they ruled both parts of Congress (outside of a massive tax cut haul for the super-rich that no one else wanted).

With my thoughts spoken, let's go to what Emily Stewart, Li Zhou, and Rebecca Leber are saying at Vox:

It’s a lot smaller than the grand dreams Democrats had when President Joe Biden took office in 2021. But the bill, the Inflation Reduction Act, still does quite a lot. It contains historic provisions to tackle climate change and takes steps toward fulfilling a longtime Democratic policy goal: letting Medicare negotiate the prices of some prescription drugs.

The bill could affect what kind of car you buy and how you heat your home. It will prevent big price increases this year for some people who purchase individual health insurance. And if you aren’t paying your taxes, there’s a better chance that the IRS will find out.

Here’s what’s in the bill and what it would mean for American life in the coming years...

The Inflation Reduction Act would be the biggest thing the US has ever done to tackle climate change, and climate makes up the largest share of the bill’s spending: nearly $370 billion.

That’s smaller than the House version from last fall, and a fraction of what Biden originally envisioned for climate. Senate Democrats claim these investments will be enough to cut climate pollution by roughly 40 percent...

The policies overall aim to push American consumers and industry away from reliance on fossil fuels. The biggest share of the funding goes to tax credits and rebates for a host of renewable technologies — solar panels, wind turbines, heat pumps, energy efficiency, and electric vehicles. It includes incentives for companies to manufacture more of that technology in the United States. The bill would also invest in energy efficiency at industrial sites that can help lower the sector’s hefty carbon footprint, while also dedicating some funds to forest and coastal restoration.

The bill, if enacted, would break new ground on other problematic areas of the climate crisis. It sets the first methane fee that penalizes fossil fuel companies for excess emissions of the especially powerful climate pollutant. Another substantial part of the funding helps disadvantaged communities with monitoring and cleaning up pollution, and builds their resilience to climate impacts...

One way Obamacare expanded health care coverage was by creating marketplaces for people to purchase insurance and offering federal subsidies to help low- and middle-income households afford it. Households making up to 400 percent of the federal poverty line — about $106,000 for a family of four — could get federal help to pay their premiums. After that, they were on their own.

But in 2021, Congress eliminated those caps, instead saying that no household should have to pay more than 8.5 percent of their income for health insurance. The change had the biggest effect on people making between 400 and 600 percent of the federal poverty line (for the same household of four, that would be up to $159,000 per year). As Vox’s Dylan Scott previously reported, the changes also enabled roughly 7 million people to qualify for free health insurance under the ACA.

Those policies, however, were set to sunset by the end of this year, leaving millions of people to face much higher health care expenses moving forward. The Inflation Reduction Act extends these subsidies for three years through the end of 2025, ensuring that people won’t face that surge for a while yet...

This bill allows them to finally fulfill that campaign promise by enabling Medicare to negotiate on prescription drugs — a major change that could lead to significant cost reductions for a small subset of drugs.

As outlined in the bill, Medicare will be able to negotiate on a handful of drugs, with those new prices taking effect in 2026. In 2026, Medicare will only be able to address costs for 10 drugs; over time, that will increase to 20 drugs. The drugs in question will be determined based on a slew of criteria, including how expensive they are...

This is mostly good news for Medicare users, which is most everyone ages 65 and up. As they're retirees on limited incomes, they need this protection. The bad news is that fixing drug prices for private insurers - those of us on HMOs - didn't pass. The failure to get insulin - a life-saving drug for millions - capped is a glaring problem, and one that Republicans refused to budge. Back to the report:

Actually raising taxes can be hard, politically. So Democrats are, in part, taking a different approach: getting people to pay more of the taxes they already owe. The Inflation Reduction Act agreement increases funding for the IRS so that it can up enforcement and go after unpaid taxes. Senate Democrats, drawing from Congressional Budget Office numbers, estimate that, by investing $80 billion in the IRS over a decade, it will collect $203 billion...

There is, in short, a large number of large corporations that have been tax dodging for years: Not just finding tax loopholes to exploit but basically refusing to hand over the taxes they still owe. There is a backlog of unpaid taxes, and there hasn't been enough IRS agents to deal with that backlog.

One 2019 paper by Natasha Sarin, now at the Treasury Department, and economist Larry Summers put the tax gap at $7.5 trillion from 2020 to 2029, with most of that figure linked to the wealthy. They calculated that underreporting was five times higher among people making more than $10 million annually than for those making under $200,000. Senate Democrats say that none of the funds directed to the IRS will be intended to increase taxes on anyone making under $400,000...

For all of the screaming by Republicans that the IRS is going to come audit you, relax. A solid majority of Americans earn well under $200,000 (the most common wage is around $45,000, and middle class would be somewhere around $65,000. If you are earning more than $100,000 you are NOT middle class, you're rich fuck you) and literally not worth the IRS' time to audit. Seriously, studies have shown most working Americans pay their taxes and with little cheating. What the IRS is going to do is go after the people and corporations who are over that $10 million cutoff, the ones who ARE most likely cheating and more deserving of those audits.

The agreement also includes a 15 percent minimum tax on corporations with profits over $1 billion. Senate Democrats note that while the current corporate tax rate is 21 percent, dozens of major companies, including AT&T, Amazon, and ExxonMobil, pay much less than that. Originally, the provision was expected to raise $313 billion, though new carveouts were added to win Sen. Kyrsten Sinema’s (D-AZ) vote, which give manufacturers and private equity firms more leeway when it comes to the new minimum tax rate. Those changes are likely to reduce the revenue this measure will bring in.

There is also a 1 percent excise tax on corporations’ stock buybacks, which are currently not subject to any taxes at all. That excise tax is estimated to raise roughly $73 billion in revenue...

This last one poses a bit of a puzzler. One of the big reasons why large corporations kept making their stock buybacks was how easy it was: a Buyback increased your stock value and gave the corporation more ownership of its own stock without really doing anything of value to justify it. Instead of putting your profits into things like raising wages for employees or investing in more capital to expand your business, you just put it back into your stocks and made the boards and CEOs richer.

The puzzler is: Will corporations live with this tax? Given how these mega-businesses are loathe to pay any tax at all, how many of them would start refusing to run their own buybacks anymore? What would happen to their profits then? They'll probably ask their army of accountants to come up with fresh ways to hide their profits and deny the U.S. government any fresh revenue.

Well, it's certainly one more reason the corporations will not give up their dark money funding for Republican election attempts.

Do us a favor, Americans: If you want Big Business to pay their fair share in taxes, make sure to vote Democratic this midterms and keep the Republicans from another round of unnecessary, deficit-causing, only-for-the-rich tax cuts.