AMAC Exclusive – By Shane Harris
In news that sent shockwaves through the political world, Senate Majority Leader Chuck Schumer and West Virginia Democrat Joe Manchin announced late Wednesday evening that they had reached an agreement on a sweeping reconciliation package, suddenly reviving large portions of President Joe Biden’s “Build Back Better” agenda. Revealed just hours before Q2 GDP data showed Thursday that the U.S. economy is indeed in a recession (despite a desperate scramble by the Biden administration to redefine the term), the new framework increases the tax burden on Americans by hundreds of billions of dollars, likely worsening the nation’s economic outlook – and perhaps sealing Democrats’ electoral fate in the process.
After Manchin killed Joe Biden’s $3.5 trillion “Build Back Better” bill last year, the West Virginia Democrat had repeatedly quashed talk of a “comeback” for Biden’s signature domestic spending plan, insisting that “there’s not a Build Back Better revival.” Conventional wisdom in Washington held that Manchin, Schumer, and Biden would agree to a far narrower package centered on lowering prescription drug costs and expanding Obamacare subsidies. But in a surprise move, Manchin signaled his approval of a far more extensive package officially titled the “Inflation Reduction Act of 2022.”
The largest spending category in the legislation by far is “energy security and climate change,” coming in at $369 billion. The bill promises to reduce carbon emissions by 40% by 2030, provide subsidies and tax breaks for electric vehicles, and more rigorously enforce environmental regulations – all major provisions of the original Build Back Better Act.
The “trade-off” here, according to Democrats and Manchin specifically, is that the bill supposedly makes investments in domestic energy production, including fossil fuels. But exactly what those investments are is unclear. The legislation does call for “comprehensive Permitting reform legislation to be passed before the end of the fiscal year,” but fails to specify what such reform would look like, or how it would increase domestic energy production. Moreover, with a four-seat Democrat margin in the House, it seems a virtual certainty that the Congressional Progressive Caucus would have the votes to kill legislation perceived as benefitting oil, gas, and coal companies, even if Schumer can keep every Senate Democrat in line.
Of primary concern for most Americans, however, should be the bill’s tax provisions.
A one-page summary of the legislation claims that it includes “no new taxes on families making $400,000 or less and no new taxes on small businesses.” That may be technically true – but as is so often the case with liberal legislation, the devil is in the details. Instead of introducing new taxes, the bill promises to raise hundreds of billions of dollars in revenue (taxes) by “closing loopholes” and “enforcing the tax code.” In other words, while millions of Americans won’t be paying any “new” taxes, the amount that they actually fork over to the federal government at the end of each year will be higher. Democrats believe, for example, they can raise $124 billion solely from “IRS tax enforcement” – government speak for targeting businesses with audits.
The new taxes that the bill imposes on businesses and wealthy individuals – most notably a 15% corporate minimum tax on large companies – are also likely to kill jobs and hamper economic growth. While Schumer and Manchin are hiding behind the now-familiar Democrat talking point of making everyone “pay their fair share,” that sentiment won’t change the fact that when businesses are taxed more, they will cut jobs, particularly with the country entering a recession.
With Schumer aiming for a vote on the bill next week using the budget reconciliation process (which allows Democrats to pass legislation with a simple majority rather than the normal 60 votes) there is little Republicans can do to stop it. Although conservatives have quickly slammed the plan, the announcement appears to have caught GOP leadership largely off guard. Senate Minority Leader Mitch McConnell had pledged just weeks ago that Republicans would not help Democrats pass a substantial semiconductor manufacturing bill “as long as Democrats are pursuing a partisan reconciliation bill.” But just hours after 17 Senate Republicans voted with Democrats to pass that legislation on Wednesday, the Inflation Reduction Act was officially introduced.
Nonetheless, passing this legislation would still be a great risk for Democrats. Regardless of how they try and spin it, the bill will increase the tax burden on millions of Americans in the middle of a recession and just months before an election. When Republican President Herbert Hoover made a similar move nearly a century ago by signing the Revenue Act of 1932, it deepened the Great Depression and ushered in two decades of uninterrupted Democrat control of Washington. Now, Joe Biden, Joe Manchin, and the rest of the Democratic Party appear poised to make a similar mistake.
Shane Harris is a writer and political consultant from Southwest Ohio. You can follow him on Twitter @Shane_Harris_
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