Republicans grope in the dark against taxes

Senate Majority Leader Chuck Schumer speaks on the Inflation Reduction Act in front of the US Capitol on August 4 in Washington.Drew Angerer (AFP)

If Senator Kyrsten Sinema allows it, Democrats appear on the verge of passing the Inflation Reduction Act, a bill that would likely reduce inflation but is primarily a much-needed effort to limit climate change.

Republicans, naturally, are attacking this legislation.

But when I look at the essence of these attacks, such as they are, I can't help but feel happier than I have in months.

For starters, the debate over the proposal seems like a throwback to a more innocent time, when Republicans tried to make their case with dishonest claims about economic policy, not insane conspiracy theories and attempts to overthrow democracy.

On the other hand, Republican criticism of the bill is very weak.

And that bodes well for the new Democratic approach to climate policy, which is based on the carrot rather than the stick, on incentives to do the right thing rather than penalties for doing the wrong thing. must do.

We are already seeing how difficult it is for Republicans to attack this approach, and it will be even more difficult when the public begins to see the benefits of environmental investments.

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Biden secures the decisive vote for his star law against inflation and climate change

Let's see the reviews.

The law provides for $369 billion in climate spending, mostly in tax subsidies for families and businesses that adopt clean energy technologies, improve energy efficiency, and the like.

$64 billion would also be spent on expanding subsidies that help keep health insurance affordable.

This new expense would be paid in full, and would be left over, mainly through the fight against tax evasion and fraud.

The biggest source of revenue will be a new minimum tax for large companies.

The legislation would also give the severely underfunded Internal Revenue Service (IRS) more resources to go after tax fraudsters.

And I'd try to save Medicare money,

How can Republicans attack a bill like this?

They cannot openly defend the interests of tax evaders and fraudsters, although their long-term efforts to deprive the IRS of resources show that they are actually on the side of tax cheats.

What they have done instead is claim—citing an estimate from the Joint Congressional Committee on Taxation (JCT), which has no partisan bias—that the legislation would raise taxes on the middle class and that this contravenes one of Joe Biden's campaign promises.

This is a false statement, on several levels.

First, the law would not increase anyone's personal income taxes.

Spot.

I just wouldn't.

Rather, what the JCT projects are “distributive effects”, an attempt to calculate the indirect burden on families resulting from other taxes, which in this case essentially means the possible effect on wages of requiring large companies to pay a minimum amount of taxes.

Calculating these effects is useful, but do they mean a “tax hike” for workers?

Almost any government policy will have an adverse effect on someone's income, somewhere;

But is everything the government does an increase in taxes?

Furthermore, if we are going to consider the indirect effect on household income of legislation that does not directly affect their taxes, why not consider the entire law and not just part of it?

The JCT table notes that it excludes the impact of several important parts of the bill that would help families, in ways ranging from lower drug costs and increased health insurance subsidies to incentives. to clean energy.

Add it all up and it's virtually certain that the middle class will come out on top.

Another aspect that I haven't seen emphasized is that the bill would likely reduce air pollution in general, not just greenhouse gas emissions, which would have significant health benefits, and monetary benefits as well.

But wait, there's more.

The JCT starts from the basis that a significant fraction of the income that would be obtained by taxing companies would end up coming from wages.

This is a subject of intense academic debate, but there are good reasons to think that, when tax evasion is combated, the effect on wages is really minimal.

Finally, for all the ways that the JCT's analysis tips the scales against the Inflation Reduction Act, the alleged middle-class tax increase is miniscule.

For example, according to the JCT, the federal tax rate for families earning between $50,000 and $75,000 a year would go from 13% to… 13.1%.

So the Republican attack on this proposal is, in a word, pathetic.

The only way it will gain momentum is if the media chooses to highlight “both sides” and fails to inform news consumers that the Republicans' claims about the bill are, in fact, false.

Unfortunately, this is a real possibility.

Disinformation aside, however, the right-wing attack on the Democrats' new climate policy is, as I said, weak, and that's a good thing to see.

While the Inflation Reduction Act is great in itself, many of us hope that it is just the down payment on an even bigger effort to save the planet.

And if this is the best the planet's enemies can do, that bodes very well.

Paul Krugman

is a Nobel laureate in economics.

© The New York Times, 2022. Translation of News Clips.

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