Sen. Joe Manchin (D-W.Va.), a key sponsor of the recently enacted Inflation Reduction Act, has vowed to ensure that the IRS “doesn’t harass anybody” after receiving an $80 billion appropriation in the bill.
The IRS provisions of the Inflation Reduction Act were among its most controversial.
The $80 billion allocated to the agency by the bill sextuples its budget, and Republican critics have warned that the bulked-up IRS could hire as many as 87,000 new agents. These agents, in turn, critics have said, will be let loose against middle-class Americans and small businesses, despite Democrats’ claims that nobody making less than $400,000 per year will see their tax bill increase.
Speaking to reporters on Aug. 16 after President Joe Biden signed the legislation, Manchin vowed to ensure that doesn’t happen.
Economy-Wide Taxes
A key claim for Democrats, including Manchin, in both the now-defunct Build Back Better Act and the Inflation Reduction Act, was that the bill wouldn’t raise taxes on people making less than $400,000 per year.However, critics have raised eyebrows at this claim, citing the effects that raising business taxes will have on consumer prices and workers’ wages, as well as the potential for abuse by a greatly expanded IRS.
Specifically, the bill would impose a 15 percent minimum tax on corporations with more than $1 billion annually in revenue, using book income rather than taxable income as the gauge, which means the bill doesn’t take into account exemptions, write-offs, deductions, or other tax code rules when deciding whether to apply the tax.
“There’s nothing in here specifically targeting income levels,” Preston Brashers, a senior tax policy analyst for the Heritage Foundation, told The Epoch Times. “They’re not targeting people making $400,000 or more.”
Neither, Brashers said, are they targeting businesses necessarily.
“A brand can’t pay a tax,” he said. “Technically, legally, the corporations are the ones paying taxes, but ultimately that has to be paid by people, one way or the other. It’s not like Jeff Bezos—if you tax Amazon—that this is coming out of Jeff Bezos’s pocket.
“It’s coming out of everyone’s pocket that’s involved in that operation, whether you’re a worker, if you buy the products, if you have any stock in the companies, if you have a 401(k).
“Basically, what they’re doing, they’re applying these taxes and they’re not specifically hitting lower-income people. What they’re doing is they’re applying general taxes across the whole economy, and so everyone’s going to be caught up in it.
‘Expanding Enforcement’
However, the effects of the IRS provisions have caused even more alarm among critics.“They’re expanding enforcement of [tax law by the IRS], they’re going to expand audits on individuals and businesses,” Brashers said, noting the appropriation to bulk up the IRS.
Proponents of the bill suggest that, in addition to the new tax code changes, a bulkier IRS will bring in an additional $124 billion annually through enforcement efforts.
The funding for the IRS will go toward “necessary expenses for tax enforcement activities … to determine and collect owed taxes, to provide legal and litigation support, to conduct criminal investigations (including investigative technology), to provide digital asset monitoring and compliance activities, to enforce criminal statutes related to violations of internal revenue laws and other financial crimes ... and to provide other services.”
Brashers argued that the IRS expansion will affect lower-income individuals and small businesses.
“If you look at the [dispersion] of audits right now, there’s a lot of audits that happen on the lower end,” he said. “Especially on the business side: if you’re a small business, a sole proprietor—if you’re running your own books—a lot of times the IRS looks at that as a prime target because you don’t have the accountants that are keeping everything buttoned down necessarily.
“If you’re a sole proprietor and you’re keeping your own books … it’s probably just going to be harder for you to keep up with the convoluted tax code.
“So, if anything, more of that weight is probably going to hit small businesses.”
“Democrats are scheming to double the size of the IRS by hiring an army of 87,000 new agents to spy on Americans,” McCarthy wrote.
Manchin Weighs In on Climate Policies
Manchin has also weighed in on some of the bill’s new climate policies, including going so far as to condemn a tax credit for electric vehicles (EV) in the bill that he helped to write.Climate policies are by far the most expensive items in the $700 billion spending bill, coming out to around $400 billion in new bills for taxpayers.
Emphasized by Democrats in the legislation are policies to give tax credits of up to $28,000 per household to families who switch to EVs, more efficient appliances, and renewable energy sources for their homes such as solar panels.
‘Red, White, and Blue Bill’: Manchin
Critics have denounced the EV kickbacks for being a tax benefit largely to wealthy families who can afford the expensive vehicles at cost, in contrast to poorer families who can’t.Speaking to reporters after the signing of the bill, Manchin admitted that he too wasn’t thrilled with the EV tax credits.
“I’m not a fan of the credits, OK?” Manchin said. “I’m a fan of basically building a supply chain here so we don’t have to be dependent on China to send their batteries and their anodes and cathodes and everything. So I’ve always said that.
“People are waiting a year right now to get their cars. Well, why would you give a discount? Why should the government give a discount when you’re willing to wait for a year for a product you want? If we’re going to do something, do something productive and good. Build a supply chain here.”
Further, the policies in the bill don’t allow people who lease an EV, as opposed to buying one, to collect the tax credit. Instead, those credits go directly to the vehicle manufacturer that leases out the vehicle. Manufacturers aren’t required under the terms of the bill to pass these savings onto the consumer.
When asked why it was the case that leases didn’t qualify for the credits, Manchin suggested that he didn’t discuss the issue during negotiations.
“We never went into that,” Manchin said. “We really didn’t. We went into basically making sure that used cars, used EVs would get the [credit], so that was the thing we compromised on.”
Manchin also noted fears of “overreach” by the Environmental Protection Agency (EPA) in enforcing the new climate rules contained in the Inflation Reduction Act and vowed to work to ensure that doesn’t happen.
“I want to make sure the EPA doesn’t overreach, and it’s balanced of how they do it. You know, there’s always a way to go out, rather than going out with a cease and desist order, go out with an idea of how you make it better, work together.
“[Critics] said this is a green bill, it’s not a green bill ... it’s a red, white, and blue bill,” Manchin added.
