A tax miracle in Washington

A tax miracle in Washington

Congress appears poised to pass legislation this month that would reduce health care costs, make historic investments in fighting climate change, and lower the price of some prescription drugs. The Inflation Reduction Act proposes to pay for these investments by raising taxes on profitable corporations and the ultra-wealthy. As financier Steven Rattner explains in a New York Times op-ed, the bill also would help reduce inflation:

This bill would use tax increases to nudge the economy toward lower inflation while addressing the pressing priorities of climate change and fast-rising prescription drug prices. In the process, the tax system would be made fairer by forcing profitable corporations to pay at least some taxes while eliminating the notorious carried interest loophole (of which I have benefited significantly). … Higher taxes used to lower the budget deficit are deflationary. They take money out of the economy, thereby reducing demand, as the Schumer-Manchin package aims to do. The Committee for a Responsible Federal Budget called it “a welcomed improvement,” a proposal that, with interest, could reduce the deficit by $100 billion annually by 2032.

The Times’ Jim Tankersley has more on the deal, which is projected to raise federal taxes by a net $68 billion over a decade. That includes $326 billion in new taxes on corporations, which would be offset by credits and other inducements designed to spur sales of electric vehicles and clean energy investments.  It’s expected to reduce the federal budget deficit by $300 billion, in part by giving the IRS the manpower it needs to audit wealthy tax cheats. 

Local officials share in inflation blame 
The cost of just about everything has been rising quickly, and contributing to public frustration with President Joe Biden’s job performance. But Vox’s Alex Yoblan writes that state and local governments bear significant responsibility for inflation, as they control land-use, permitting and other decisions that have a significant effect on consumer prices. 

The power authorities that oversee much of the energy market are creations of state governments, and decisions like whether and where to build new transmission lines and electric vehicle charging stations lie with municipalities. As a result, local actors have stymied the transition away from fossil fuels, leaving the country more exposed to sudden shocks in prices, said Samantha Gross, the director of the Brookings Institution’s Energy Security and Climate Initiative and author of a report on local obstacles to renewable energy.

Last week, the Louisiana Public Service Commission questioned Entergy, a state regulated agency, about its refusal to transition away from fossil fuels to generate energy, and that decision’s impact on rising prices for consumers. 

Luring insurers to Louisiana 
When large insurers fled Louisiana in the aftermath of hurricanes Katrina and Rita, the Legislature created an incentive program to make our disaster-prone state more attractive to private insurers. Now, after hurricanes Laura, Delta, Zeta and Ida caused spikes in insurance claims statewide and seven companies to declare insolvency, state Insurance Commissioner Jim Donelon wants to revive the Insure Louisiana Incentive Program. The Advocate’s Robert Stewart reports

Donelon declined to commit to a specific total he’d ask for, though he said the state offered $100 million through the incentive program in 2006, funded by surplus dollars from higher tax collections and federal cash infusions. Of that total, $29 million was snatched up. Donelon hinted that a budget amendment later this year might be the best route to identify funds. He added that the total could be adjusted based on the Consumer Price Index. “What we are asking is the governor and the legislative leaders to do what we did very successfully after Katrina and Rita,” Donelon told the Press Club of Baton Rouge.

Abortion-restricting states do the least for kids
By almost any measure, Louisiana is one of the toughest places to have and raise a child. The state has the highest gender pay gap in the country, no minimum wage and child poverty rates that are among the worst in the nation, while residents have little access to paid family and medical leave. As ITEP’s Amy Hanauer explains, long-standing failures to provide for children’s wellbeing are a common thread in the states that force pregnant people to give birth.

None of the states forcing childbirth have refundable credits for children, which help families pay for a small share of the enormous costs of raising kids. Of the nine states that already had or just added refundable tax credits for children, all are pro-choice states. Existing state Child Tax Credits vary widely in credit size, income limits and eligibility, but it is notable that no anti-choice state provides one. Just five of the abortion-restrictive states provide refundable Earned Income Tax Credits (EITCs) to assist low-income parents, something 23 pro-choice states now offer. … Most of the abortion-banning states rank in the bottom half on education funding per child. Seven of the 10 states spending the least on education in a 2020 assessment are among the states that will now compel children to be born, regardless of whether they have parents who can care for them. Nine of the 10 states spending in the top 10 on education are pro-choice states.

Number of the Day
$68 billion – Amount of net federal revenue that the Inflation Reduction Act is expected to generate over 10 years. (Source: Joint Committee on Taxation via The New York Times