Regardless of what your political affiliation is, you’ve likely noticed by now that inflation is taking money out of your pocket everywhere, on pretty much everything. What you may not know, is just how much more money certain of our elected “representatives” plan on raiding your bankroll in the future as well.
Those of you who know me well know by now that I’m the kind of guy who actually reads the text of laws that are proposed or passed, because it’s my experience that’s so much garbage is hidden from the public in the fine print of proposals that are spun in the public forum to be helpful, when in fact they mostly make matters worse. I like to actually know what’s in them. You should too.
This Inflation Reduction Act we’re hearing about is one such proposal.
The public forums tout that it has got all sorts of stuff that makes it people say “Oh yeah, we need that” like lower drug costs for those with Medicare, supposedly cleaner air (some estimates put emissions reduction at 40 percent by 2030), more stable health care premiums for millions of low income folks, and maybe significant savings on power bills for most Americans, among other things. All good, right?
But this is exactly one of those examples that is titled so it sounds good…but oh my gosh, it ain’t.
And again, while you might think I’m biased because I’m a Libertarian, facts are facts whether you’re conservative, liberal or somewhere in between.
First, since the government has no money of its own, where is all the money to pay for these wonderful things going to come from? One guess. Do we get any real say so on that? Nope.
More importantly, here’s the bottom line: the Inflation Reduction Act will have ZERO impact on reducing inflation.
The Wharton School of Business, well known for its objective points of view, says this:
“Over the first five years (2022 – 2026), CBO [Congressional Budget Office] estimates only $21 billion in accumulated deficit reduction. Over the same period, however, payments to liquidity constrained households, including enhanced subsidies for the Affordable Care Act, exceed total deficit reduction, with the sum mostly financed by entities and households that are not liquidity constrained. The impact on inflation could be positive or negative under CBO’s estimate. Regardless, any change would be too small to be detectable in PCE inflation estimates that the Bureau of Economic Analysis reports to the first decimal place.
Statistically, even ignoring its composition, CBO’s estimated $21 billion in total deficit reduction amounts to less than 0.018% (2/100th of one percent) of cumulative projected GDP over the same years. That is a tiny fraction of its (single) standard deviation of variation. The impact on inflation is statistically indistinguishable from zero.”
https://budgetmodel.wharton.upenn.edu/issues/2022/8/5/inflation-reduction-act-comparing-cbo-and-pwbm-estimates
Read that again – The impact on inflation is statistically indistinguishable from ZERO. And make no mistake, the authors of this bill knew that from the get-go, so why call it “The Inflation Reduction Act”??
Because it sounds “meaningful and positive” to the generally uniformed and apathetic populace that we are.
And so you know, the Personal Consumption Expenditures Index (the PCE mentioned above) encompasses a broader range of goods and services than the Consumer Price Index (which the govt uses to measure inflation rates) from a broader range of buyers and is widely held in academic circles as a much better barometer of consumer costs.
More importantly, even it if did reduce inflation, (you sure won’t hear THIS mentioned on TV) this proposal effectively breaks President Biden’s campaign promise not to raise taxes on individuals earning less than $400,000.
Next year alone, the effects of this legislation will raise taxes on EVERY SINGLE INCOME CATEGORY, including people earning less than $10,000 per year!
Wait…what?
Yessiree. This proposal will hike taxes on Americans earning less than $200,000 per year (not just folks making over $400,000) by a whopping $16.5 billion plus next year alone. By the end of the decade, roughly half of the new taxes raised by the plan would come from families earning less than $200,000.
How do I know?
The US Senate’s Joint Committee on Taxation tables for Average Tax Rates under the present laws versus the proposed laws tells me (and you) so. See for yourself.
https://www.finance.senate.gov/imo/media/doc/jct_distributional_effects_inflation_reduction_act.pdf
Overall, the “Inflation Reduction Act” will increase taxes and tax collections by roughly $470 billion.
You can’t make this shit up.
“But wait John, a lot of those increased taxes will come from tariffs on oil and gas producers and forcing corporations to pay their ‘fair share’ of taxes!”
Yep. That’s true. Along with 87,000 new IRS agents to go after those extra tax $$, this legislation will set higher fees on gas and oil and will impose a 15% minimum corporate tax rate.
And if you think that hike in the corporate tax rate is going to make some personal difference to you, I have no doubt you’re absolutely right…but not in a good way.
There are 17.5 million corporations in the US. Only 9,000 made over $1 billion in income last year. That’s 5/100ths of 1%, meaning a REALLY small number when you look are the big picture. 55 of them paid zero taxes. Is that REQUIRED minimum aimed at only the big dogs that pay a far less that average low amount?
Nope.
Of the 17.5 million US corps, 12.4 million have less than 5 employees. Over 14 million have less than 10. And more than 15 million of those 17.5 million corporations in the US had UNDER $1 million in sales revenue. Make note that $1 million is income, not profit. While the general public thinks the average company has a 36% profit margin, in reality that number is 7.5%.
So, put your business hat on and let’s do a little math.
Suppose you’re one of the 15.4 million business owners that make under $1 million a year. And let’s say you’re one of the lucky .11% of those that make right at the top, $999,999 a year and you have a (true) average profit margin of 7.5%. That means your annual income from your business is just shy of $75,000.
Chances are pretty good your taxes just went up. Where’s that money going to come from?
Hmmm…let’s see. You could reduce your family’s standard of living…or NOT. You could fire one of your 4 employees. No, they really need that job and who would do the work that they do? So, you raise your prices and blame it on inflation.
If you don’t believe that the increase in corporate taxes and fees to oil and gas companies won’t simply be passed along to consumers – meaning you – in the form of higher prices across the board then you clearly haven’t been an adult for very long.
With inflation at a 40-year high, the GDP (Gross Domestic Product) shrinking for two straight quarters (meaning we’re in a recession despite the Biden administration’s lame attempt to move the goal posts), labor force participation hovering at around a 45-year low and every major stock market index — including the S&P 500, NASDAQ, Dow Jones Industrial Average, Russell 2000, and the New York Stock Exchange composite — having seen double-digit declines in 2022, equating to trillions of dollars in American workers’ retirement savings up in smoke, now comes this.
Let’s see it for what it really is folks.
This so-called “Inflation Reduction Act” is nothing more than a thinly veiled, obverse-named attempt to pass pet priorities ahead of the midterm elections under the guise of reducing inflation. In reality, consumers (meaning you and I) will pay more — to the IRS and on everyday goods and services. Get ready.
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