White House pushes back on GOP claim that Manchin bill hikes middle-class taxes

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The White House said Monday that Republicans are wrong to claim that Democratic legislation would increase taxes for those earning less than $400,000 annually.

White House press secretary Karine Jean-Pierre told reporters that it is the administration’s view that the tax and spending bill would not increase the tax burden for the middle class, although recent modeling seems to contradict that. Jean-Pierre said key data were left out of the calculation.

Last week, it was revealed that Sen. Joe Manchin (D-WV) had signed on to the healthcare, tax, and climate reconciliation proposal, dubbed the Inflation Reduction Act of 2022. Since then, Republicans have come out in full-throated opposition and asked the Joint Committee on Taxation to analyze some of the details of the plan.

The committee found that because of increased taxes on corporations, people in every tax bracket would suffer losses. The overall tax burden for those earning less than $200,000 annually would increase by $16.7 billion in 2023, according to the analysis, known as scoring.

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“It is incomplete,” Jean-Pierre said of the analysis on Monday. “The JCT report that we’re currently seeing is incomplete because it omits the actual benefits that Americans would receive when it comes to prescription drugs, when it comes to lowering energy costs like utility bills. It does not include that, and we have some experts.”

President Joe Biden, whose administration has heralded the legislation, vowed on the campaign trail not to raise taxes for anyone making below $400,000, and with the new scoring, Republicans are crying foul.

The legislation does not impose direct tax increases for those earning less than $400,000. However, the JCT numbers show the projected effect of increasing corporate taxes and how that would translate to shareholders.

The United States has a 21% corporate tax rate, which it assesses based on companies’ tax returns. The new proposal would assess a minimum 15% tax on the adjusted financial statement income of corporations — “book income.” Democrats say the provision will raise $313 billion in new tax revenue.

The increased burden comes because people earning less than $400,000 who have investments in corporate stocks are expected to see those stocks become less valuable after the new book tax is implemented, Garrett Watson, a senior policy analyst at the Tax Foundation, told the Washington Examiner. Also, low-wage workers would see their wages decline as their employers adjusted to the new tax.

“This would reduce the return on those equities and reduce after-tax incomes for those households,” Watson said. “That’s nearly as direct as an income tax hike. There are other indirect impacts, of course, including a negative impact on worker wages over the long run due to the book minimum tax.”

Still, Republicans assert that the indirect increases are synonymous with Biden breaking his campaign promise.

“Nonpartisan analysts are confirming this bill raises taxes on the middle class and produces no meaningful deficit reduction when gimmicks are removed and the full cost is accounted for,” Sen. Mike Crapo (R-ID) said. “It’s no wonder this bill, which was drafted behind closed doors, is being rushed through the Senate at record pace.”

A spokeswoman for Republicans on the Senate Finance Committee noted to the Washington Examiner that one study found that up to 50% of a corporate tax increase is borne by workers, and another found 31% is borne by consumers via price hikes and that 38% is borne by workers via lower wages.

Meanwhile, the Democrats are pointing out that the JCT score requested by Republicans doesn’t include a calculation of the effects of Obamacare tax credits, prescription drug savings, and clean energy tax credits.

“A family making less than $400,000 will not pay one penny in additional taxes under the Inflation Reduction Act,” said a spokeswoman for Democrats on the Senate Finance Committee. “The analysis Republicans are pointing to is also incomplete. It doesn’t include the benefits to middle-class families of making health insurance premiums and prescription drugs more affordable. The same goes for clean energy incentives for families.”

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The landmark Democratic legislation, which came after Biden’s “Build Back Better” agenda fell apart, also includes hiking taxes on carried interest, a form of income earned by private equity funds that is subject to a lower tax rate.

The bill still faces obstacles, even with Manchin’s support. Sen. Kyrsten Sinema (D-AZ), another centrist who has been hesitant to go along with some of her party’s tax and spending initiatives, hasn’t said whether she will throw her must-have support behind the plan.

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