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Nothing Is Certain But Death and Taxes. The IRS Can Deliver Both
In Orwellian Washington, DC-speak, a “budget reconciliation” bill is winging its way through Congress. Under the post-Watergate 1974 Budget Control and Impoundment Act, “reconciliation” bills have special status, especially in the United States Senate.
More Orwellian than calling it a “reconciliation” bill is its actual title: The Inflation Reduction Act. It does no such thing. But by the time you read this, it will likely have passed the Senate and is on its way to being rubber-stamped by a House narrowly controlled by Democrats and signed by a clueless, hapless, and compliant President. The Senate vote, I predict, will be 51-50, with Kamala Harris breaking the tie. There is always a chance a Senator won’t show up but don’t count on that.
Unlike most legislative items, reconciliation bills cannot be filibustered. A simple majority enacts them. Debate is limited to 30 hours. But it resembles a Faustian bargain. The bill (and any amendments) must strictly focus on permanent spending and tax programs – no “extraneous” provisions. Any attempts to mask policy issues as “revenue raisers” – such as raising the federal minimum wage to $15 per hour – are verboten unless a supermajority of 60 Senators says so.
For those reasons, our current very slim Democratic majority endlessly and aggressively tries to cram as many of its agenda items in reconciliation as possible. The Senate Parliamentarian gives the “reconciliation” bill a “Byrd bath,” so named for the late Senate Majority Leader who, in 1985, became concerned about abuse of the reconciliation process. He was prescient about his own caucus.
But Byrd baths and budget rules can’t fix all horrible big spending and tax provisions that have made their way into this horrific legislation.
Much has already been written about the 15 percent minimum corporate tax allowing Medicare, our nation’s largest government health care program, to “negotiate” (i.e., set) prescription drug prices. There are many other bad ideas, especially billions to fund so-called “green energy” programs, including wildly distortive tax credits for not-as-environmental-friendly-as-you-think electric vehicles. Owners of those heavier-than-gas-operated vehicles also pay practically nothing to maintain roads and bridges, funded largely through state and federal fuel taxes.
But one provision that is escaping much notice as a “revenue raiser” is $80 billion in new spending for the Internal Revenue Service to double it’s workforce, adding 87,000 new agents over the next 5 years. Ostensibly, this “investment” will result in $200 billion in new revenue by catching tax cheaters.
Click into it
There’s an entire industry built around it. 401k, ESOPs, financial planning services – All of these are intended to protect your money from taxes. It’s not just wealthy people. The entire retirement trade is about helping the middle class protect their retirement savings.
100% Dead capital because we can’t stop central planning with the tax code. It makes the GDP go backwards.
The business raises the price at checkout, by the amount of the tax. Very few places include tax with the price, and I think in many states it may actually be illegal to do so. Yet the business collects the tax, and pays it to the state/county/city/etc, from the gross payment they receive for items which has the tax added. So I count it as the business paying an income tax on gross sales.