The breakthrough deal negotiated in late July between Senate Democrats and West Virginia Sen. Joe Manchin revives some of the provisions included in Joe Biden’s earlier Build Back Better Plan that Manchin and Arizona Sen. Krysten Sinema killed last year. The slimmed down legislation, called the Inflation Reduction Act of 2022, allocates $739 billion to address the climate crisis, energy production and health care reform while paying down the national debt.
To pay for the new programs, the agreement includes a 15 percent minimum tax on the nation’s most profitable corporations that paid little or no federal taxes in recent years, while also increasing funding for the IRS to enable the agency to investigate wealthy tax cheats and corporations employing accounting tricks to avoid paying their fair share of taxes. Another provision closes the notorious carried interest tax loophole that benefits wealthy Wall Street hedge fund managers.
Between The Lines’ Scott Harris spoke Maura Quint, wealth tax campaign director with Americans for Tax Fairness, who assesses the tax reform proposals in the Senate’s Inflation Reduction Act and America’s wealthy individuals and corporations that are working to defeat the bill.
MAURA QUINT: There are three key items of tax fairness that are included in this. And in fact, the tax items are how the rest of the bill is being paid for. This bill is completely paid for. So it is not deficit spending. In fact, it’s going to be a presumably net zero bill. And the three provisions are, I think, most importantly, that there will be an imposed 15 percent minimum tax on America’s biggest corporations. Only the very biggest corporations.
But these corporations like Amazon, FedEx, Netflix have often gone years paying little to nothing in federal income taxes. And so, this is trying to rectify that and ensure that these large corporations aren’t getting away with paying less than a teacher or a nurse has to pay. So that is one of the key elements. Also, it’s going to be closing a loophole that has allowed Wall Street money managers to pay lower taxes than the rest of us.
It closes this notorious carried interest loophole. So that is something that again, is just targeting very, very wealthy who have been able to get away with something because a loophole existed. And this will close that.
And then the third provision is IRS funding. Right now, there are a lot of people, a lot of very wealthy people who are getting away with not paying what they owe in taxes. And unfortunately, the IRS has not had the ability to really go after them because they are not properly funded. So giving the IRS funding will simply allow them to then recoup the money that has been owed and that already is on the books and should have been paid. And now we have the opportunity to reclaim that. So those are the big tax elements here that we’re seeing.
SCOTT HARRIS: How is it that we have major corporations in the United States that are making more than $1 billion a year in profits that pay absolutely no federal tax? They pay zero taxes when the average person on a minimum wage family budget are paying their fair share. But big companies with gargantuan budgets themselves are paying nothing. How do we have a situation like that that this provision addresses?
MAURA QUINT: It’s frustrating, isn’t it? It’s one of those things that when you hear about it, it’s really galling to know that that’s been the case. But really, we are coming off of the tail end of I want to say, about 40 years of tax policy that has operated under this completely defunct, disproven notion of trickle down, which probably most people have heard — “trickle down economics” because, you know, it’s a popular sounding phrase at least.
So it’s gone around. But it’s this idea that if we allow these wealthiest among us huge amounts of money, somehow that money’s going to make its way to the rest of us. And so if we allow corporations, we keep giving them additional tax cuts over tax cuts, over tax cuts. Somehow those tax cuts are going to eventually wind up in the pockets of the workers.
But having had more than 40 years to see what happens, that is not what happens. What happens when we give these corporations massive tax cuts and we allow them to go and create policy that allows them to pay nearly nothing or nothing in taxes. They do not invest in their workers. It does not trickle down. In fact, what happens is they generally trade in massive stock buybacks, which helps the investors.
They give their CEOs massive amounts of bonuses and golden parachutes. And they invest more in the upper echelon, the owners and the richest individuals who are investing in and owning these companies. And so we’ve seen this policy continue over and over. And it’s snowballed to such a point that we now have corporations who are getting away with paying really nothing.
And so it’s long past time that we start to do something about it. And it’s been really great to see in this proposal that Democrats are really taking this on and are trying to rectify this pretty egregious tax problem.
SCOTT HARRIS: I wanted to just highlight for a moment the provision in this bill to close the carried interest loophole that primarily benefits Wall Street’s wealthy hedge fund managers. Tell us a bit about that. What we are likely to see is strong opposition from this group of people that are privileged to pay less of their income in terms of taxes than most other people. Update here on 8/5/22: Sinema made Schumer cut carried interest loophole from reconciliation bill.
MAURA QUINT: Yeah, I mean, we have a very skewed tax code right now in our country where we tax income that is earned from paychecks at a certain rate and we tax income that is made off of capital gains at a different rate. And so when you talk about Wall Street managers, they’re in this nebulous place in between where they’re making money off of capital gains and they have been allowed to get taxed at the lower capital gains rate when what they are doing is really something that counts in the paycheck world.
And so this is just moving them into the proper tax classification really, and closes up a loophole that previously allowed them. And yes, that is one of the difficulties that we’ve had. The wealthiest individuals have a lot of opportunity and a lot of ability to lobby in their favor. And the rest of us to this point haven’t had a strong lobby necessarily that is out there trying to move things on our behalf.
For more information, visit Americans for Tax Fairness at americansfortaxfairness.org.
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