Is he raising taxes on the middle class as the GOP claims?

As Democrats await the results of parliamentary review of their reconciliation budget bill — and whether or not Senator Kyrsten Sinema (D-AZ) approves of the plan — economists are busy analyzing performance. of the legislative package. over the next 10 years. Here is a summary of what they said:

Moody’s: The Democrats’ Cut Inflation Act would benefit the broader economy, Moody’s analysts found, although the effects on growth and inflation would be modest. The law project “raises nearly $750 billion over the next decade through higher taxes on big business and wealthy individuals and lower Medicare prescription drug costs, to pay nearly $450 billion in relief taxes and additional government spending to address climate change and pay lower health insurance premiums for Americans benefiting from the Affordable Care Act,” the analysts wrote. “The remaining $300 billion will be used to reduce future federal budget deficits. Overall, the legislation will nudge the economy and inflation in the right direction, while significantly tackling climate change and reducing government budget deficits.

Penn Wharton budget model: Penn Wharton’s budget model analysts also found relatively modest effects on inflation, predicting that the bill would raise inflation slightly for a few years before lowering it in subsequent years – although their results are “statistically indistinguishable from zero”. The bill would also reduce the deficit while having virtually no effect on growth. “PWBM estimates that the Inflation Reduction Act would reduce accumulated noninterest deficits by $248 billion over the budget window with no impact on GDP in 2031,” the analysts wrote.

The Committee for a Responsible Federal Budget: According to fiscal hawks at the CRFB, the bill’s deflationary effects are likely to be greater in the long run than Penn Wharton thinks. “Ultimately, we expect the IRA to very modestly reduce short-term inflationary pressures while reducing the risk of persistent inflation over time and thus making it easier for the Federal Reserve to reduce inflation. without causing a recession,” the CRFB said.

Overall, the Democratic package “does well in tackling inflation, reducing the deficit, and when fully implemented, would actually reduce net spending, without increasing net taxes,” said Maya MacGuineas of the CRFB at the New York Times. “It’s a pretty monumental improvement.”

The Tax Foundation: New analysis from the Conservative Fiscal Foundation finds the Democrat bill would have little effect on inflation but would hurt the economy in the long run, cutting economic output and wages by 0.1% over 10 years, while eliminating approximately 30,000 jobs that would otherwise have been created. “By reducing long-term economic growth, this bill could actually worsen inflation by limiting the economy’s productive capacity,” the analysts wrote.

The joint tax committee: The nonpartisan Joint Committee on Taxation released an analysis last week concluding that the bill would raise taxes for virtually all households, since corporations would pass the new 15% minimum tax rate on to consumers. The conclusion was hotly debated this week, with Republicans citing the analysis as evidence that Democrats are trying to create new tax burdens for middle-class families and Democrats saying the JCT analysis is both misleading and incomplete.

“[T]The only things their ‘inflation plan’ will cut are American jobs, wages, after-tax incomes, energy affordability and new life-saving drugs,” he said on Tuesday. Minority Leader Mitch McConnell (R-KY). “Wow, what an accomplishment.”

A spokesman for Senate Finance Committee Chairman Ron Wyden (D-OR) responded to the GOP accusations by saying, “A family earning less than $400,000 will not pay a penny in additional tax under Inflation Reduction Act. It’s the same economic argument that Republicans have been making for decades, and the American people aren’t buying it.

Appearing on Fox News on Tuesday, Sen. Joe Manchin (D-WV), made a similar point. Responding to an interviewer’s claim that middle-class families would see a tax hike under the bill, Manchin said, “That’s not true. This is a lie. It is a pure and pure lie.

In less impassioned language, analysts at the nonpartisan Center for Fiscal Policy attempted to shed some light on the partisan dispute over the JCT’s analysis, while cautioning readers against accepting the JCT’s findings too quickly. The assumptions built into the JCT model may not hold in today’s economy, which deviates from standard economic models by exhibiting high levels of “rents, excess returns or excess profits” – which would distort the effects of an increase in corporate tax and reduce the impact felt by ordinary households. “[A] A closer look at how corporate taxes currently work calls into question the estimated federal tax changes for middle- and low-income households,” concluded William G. Gale and John Buhl of PTC.

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