Inflation Reduction Act won’t reduce inflation. That’s just one of its faults
Morning Call (Allentown, PA)
With Americans being crushed by inflation as the midterm election nears, desperate Democrats led by President Joe Biden are patting themselves on the back for passage of the Inflation Reduction Act.
The $740 billion package signed by Biden on Tuesday includes tax breaks and tax increases. It makes America’s largest investment to fight climate change and rescues seniors from exorbitant prescription costs.
But not everything in the 730-page law is worth celebrating. Some of the initiatives and spending are warranted. In other ways, the legislation falls short of making a significant impact and is wasteful.
The IRS finally is going to be able to beef up its staff so it can do its job, including processing tax returns promptly and catching tax deadbeats.
The agency is slated to get an additional $80 billion over a decade. That includes $45 billion for tax enforcement and $25 billion for operations.
Every Republican senator opposed that. To rile up voters before the midterm, some falsely accused the Biden administration of planning to sic tax auditors on average, hardworking folks to squeeze a few more bucks out of them.
What the GOP really fears is that the agency will start digging into the tax returns of the filthy rich and corporate America, otherwise known as the GOP donor base.
The IRS has been underfunded for years. That’s a big reason why IRS officials have estimated that tax evasion and fraud amount to as much as $1 trillion a year. And why honest, hardworking taxpayers wait a year or more for meager refunds.
This funding is a good investment. It is projected to net hundreds of billions of dollars in additional taxes, according to the Congressional Budget Office.
Benefits for coal miners
This part of the Inflation Reduction Act hasn’t received much attention but it is critical for some of the hardest working Americans. The legislation permanently extends a tax rate on coal that goes to the Black Lung Disability Trust Fund.
That fund, which pays health benefits to former coal miners who got sick on the job, is at-risk of becoming insolvent at a time when the number of black lung cases is rising.
In December, because Congress failed to act to preserve the tax rate as it had done in previous years, the rate was cut in half. This legislation restores the higher rate permanently.
Medicare drug costs
The federal government has long failed to harness the massive buying power it holds because of the volume of drugs it buys through Medicare. That has resulted in Medicare recipients, and taxpayers, paying more than necessary.
The Inflation Reduction Act finally frees the government to throw its weight around to achieve price discounts. That is estimated to save the government nearly $100 billion over a decade.
Medicare recipients will benefit by having their out-of-pocket costs capped. Starting next year, out-of-pocket costs for insulin will be capped at $35 a month. And in three years, there will be a cumulative $2,000 annual cap on out-of-pocket costs for all drugs.
That could save about 3.5 million people more than $1,500 a year, according to the Council for Informed Drug Spending Analysis.
Inflation reduction? Not really.
Heading into the midterm election with Biden’s approval rating in the gutter, the law was named to make it appear as if Democrats had found the solution to the crushing cost of groceries, gasoline, housing and other products.
Don’t be duped.
While the legislation lays the ground work for future savings in health care and energy costs, it won’t make any immediate difference in daily costs.
The University of Pennsylvania’s Penn Wharton Budget Model said the law will have “no meaningful effect on inflation in the near term.” It projects the legislation to reduce inflation by about 0.1 percentage points in five years — that’s essentially nothing.
Wharton’s analysts said they have a “low level of confidence that the legislation would have any measurable impact on inflation.”
That makes the name of the legislation a fraud.
Tax breaks for the rich to buy electric cars
To encourage more people to buy environmentally friendly electric vehicles, the Inflation Reduction Act allows a tax credit of $7,500 for the purchase of some vehicles, starting next year.
The fine print is deep on this one. A big qualifier is that the vehicles must be assembled in North America, which rules out many models.
And there are income limits. Credits, which will be applied at the vehicle’s purchase, are available to individuals who earn $150,000 or less, and joint-filing couples with incomes of up to $300,000.
Those caps are too high.
People who make that much money can afford to buy a car without a government handout. They don’t need a tax break. The government, though, sure could use that tax money to pay down the deficit or provide services and assistance to people who truly need help.
Medicare drug costs
Lower drug costs from negotiations between Medicare and drug companies won’t start until 2026. Why are we waiting so long?
Start driving down the prices next year, or perhaps two years at the most if it will take the slothlike government that long to build its process.
And the negotiations will be limited to only 10 drugs in 2026 and 15 in each of 2027 and 2028, then 20 in subsequent year. Again, why?
Negotiations should be broader.
Morning Call columnist Paul Muschick can be reached at 610-820-6582 or [email protected]