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Does the Inflation Reduction Act violate Biden’s $400,000 tax pledge?

JimWatson | Afp | Getty Images

Senate Democrats’ package of climate change, health-care, drug pricing and tax measures unveiled last week has proponents and opponents debating whether the legislation violates a pledge President Joe Biden has made since his presidential campaign, to do not raise taxes on households with incomes below $400,000 a year.

The answer isn’t quite as simple as it seems.

“The fun part about this is, you can get a different answer depending on who you ask,” said John Buhl, an analyst at the Tax Policy Center.

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The White House has used $400,000 as a rough dividing line for the wealthy relative to middle and lower earners. That income threshold equates to about the top 1% to 2% of American taxpayers.

The new bill, the Inflation Reduction Act, doesn’t directly raise taxes on households below that line, according to tax experts. In other words, the legislation wouldn’t trigger an increase on taxpayers’ annual tax returns if their income is below $400,000, experts said.

But some aspects of the legislation may have adverse downstream effects — a sort of indirect taxation, experts said. This “indirect” element is where opponents seem to have directed their ire.

What’s in the Inflation Reduction Act

The legislation — brokered by Senate Majority Leader Chuck Schumer, DN.Y., and Sen. Joe Manchin, DW.Va., who’d been a key centrist holdout — would invest about $485 billion toward climate and health-care measures through 2031, according to a Congressional Budget Office analysis issued Wednesday.

Broadly, that spending would be in the form of tax breaks and rebates for households that buy electric vehicles and make their homes more energy-efficient, and a three-year extension of the current Affordable Care Act subsidies for health insurance.

The bill would also raise an estimated $790 billion via tax measures, reforms for prescription drug prices and a fee on methane emissions, according to the Congressional Budget Office. Taxes account for the bulk — $450 billion — of the revenue.

Critics say corporate changes could affect workers

Specifically, the legislation would provide more resources for IRS enforcement of tax cheats and would tweak the “carried interest” rules for taxpayers who earn more than $400,000. Carried-interest rules allow certain private equity and other investors to pay a preferential tax rate on profits.

Those elements aren’t controversial relative to the tax pledge — they don’t raise the annual tax bills middle and low earners owe, experts said.

The Inflation Reduction Act would also implement a 15% corporate minimum tax, paid on the income large companies report to shareholders. This is where “indirect” taxes might come into play, experts said. For example, a corporation with a higher tax bill might pass on those additional costs to employees, perhaps in the form of a lower raise, or reduced corporate profits may hurt 401(k) and other investors who own a piece of the company in a mutual fund.

The Democrats’ approach to tax reform means increasing taxes on low- and middle-income Americans.

Sen. mike krapo

Republican of Idaho

The current corporate tax rate is 21% but some companies are able to reduce their effective tax rate and therefore pay back their bill.

As a result of the policy, those with incomes below $200,000 would pay almost $17 billion in combined additional tax in 2023, according to a Joint Committee on Taxation analysis published July 29. That combined tax burden falls to about $2 billion by 2031, according to the JCT, an independent scorekeeper for Congress.

“The Democrats’ approach to tax reform means increasing taxes on low- and middle-income Americans,” Sen. Mike Crapo, R-Idaho, ranking member of the Finance Committee, said of the analysis.

Others say financial benefits outweigh indirect costs

However, the JCT analysis does not provide a complete picture, according to experts. That’s because it doesn’t account for the benefits of consumer tax rebates, health premium subsidies and lower prescription drug costs, according to the Committee for a Responsible Federal Budget.

Observers who consider indirect costs should weigh these financial benefits, too, experts argue.

“The selective presentation by some of the distributional effects of this bill neglects benefits to middle-class families from reducing deficits, from bringing down prescription drug prices and from more affordable energy,” a group of five former Treasury secretaries from both Democratic and Republican administrations wrote Wednesday.

The $64 billion of total Affordable Care Act subsidies alone would “be more than enough to counter net tax increases below $400,000 in the JCT study,” according to the Committee for a Responsible Federal Budget, which also estimates Americans would save $300 billion on costs and premiums for prescription drugs.

The combined policies would offer a net tax cut for Americans by 2027, the group said.

Further, setting a minimum corporate tax rate shouldn’t be viewed as an “extra” tax, but a “reclaiming of revenue lost to tax avoidance and provisions benefitting the most affluent,” argued the former Treasury secretaries. They are Timothy Geithner, Jacob Lew, Henry Paulson Jr., Robert Rubin and Lawrence Summers.

There are additional wrinkles to consider, though, according to Buhl of the Tax Policy Center.

For example, to what extent do companies pass on their tax bills to workers versus shareholders? Economists differ on this point, Buhl said. And what about companies with a lot of excess cash on hand? Might that cash buffer lead a company not to levy an indirect tax on its workers?

“You could end up going down these rabbit holes forever,” Buhl said. “It’s just one of the fun parts of tax pledges,” he added.



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Peggy Noonan is an opinion columnist at the Wall Street Journal where her column, “Declarations,” has run since 2000.

She was awarded the Pulitzer Prize for Commentary in 2017. A political analyst for NBC News, she is the author of nine books on American politics, history and culture, from her most recent, “The Time of Our Lives,” to her first, “What I Saw at the Revolution.” She is one of ten historians and writers who contributed essays on the American presidency for the book, “Character Above All.” Noonan was a special assistant and speechwriter for President Ronald Reagan. In 2010 she was given the Award for Media Excellence by the living recipients of the Congressional Medal of Honor; the following year she was chosen as Columnist of the Year by The Week. She has been a fellow at Harvard University’s Institute of Politics, and has taught in the history department at Yale University.

Before entering the Reagan White House, Noonan was a producer and writer at CBS News in New York, and an adjunct professor of Journalism at New York University. She was born in Brooklyn, New York and grew up there, in Massapequa Park, Long Island, and in Rutherford, New Jersey. She is a graduate of Fairleigh Dickinson University in Rutherford. She lives in New York City. In November, 2016 she was named one of the city’s Literary Lions by the New York Public Library.



Sandy Hook dad says Alex Jones made his life a ‘living hell’

AUSTIN, Texas– The father of a 6-year-old killed in the Sandy Hook Elementary School shooting testified Tuesday that conspiracy theorist Alex Jones made his life a “living hell” by pushing claims that the murders were a hoax.

In more than an hour of emotional testimony during which he often fought back tears, Neil Heslin said he has endured online abuse, anonymous phone calls and harassment on the street.

“What was said about me and Sandy Hook itself resonates around the world,” Heslin said. “As time went on, I truly realized how dangerous it was. … My life has been threatened. I fear for my life, I fear for my safety.”

Heslin said his home and car have been shot at, and his attorneys said Monday that the family had an “encounter” in Austin since the trial started and have been in isolation under security.

Heslin and Scarlett Lewis, the parents of 6-year-old Jesse Lewis, have sued Jones and his media company Free Speech Systems over the harassment and threats they and other parents say they have endured for years because of Jones and his Infowars website. Jones claimed the 2012 attack that killed 20 first-graders and six staffers at the Connecticut school was a hoax or faked.

Heslin and Lewis are seeking at least $150 million in the case.

“Today is very important to me and it’s been a long time coming… to face Alex Jones for what he said and did to me. To restore the honor and legacy of my son,” Heslin said.

Heslin also said that while he doesn’t know if the Sandy Hook hoax theory originated with Jones, it was Jones who “lit the match and started the fire” with an online platform and broadcast that reached millions worldwide.

Heslin told the jury about holding his son with a bullet hole through his head, even describing the extent of the damage to his son’s body. A key segment of the case is a 2017 Infowars broadcast that said Heslin holding his son didn’t happen.

An apology from Jones wouldn’t be good enough at this point, he said.

“Alex started this fight,” Heslin said, “and I’ll finish this fight.”

Jones wasn’t in court during Heslin’s testimony, to move the father called “cowardly.” Jones has skipped much of the testimony during the two-week trial and had a cadre of bodyguards in the courtroom when he did attend. Tuesday was the last scheduled day for testimony and Jones was expected to take the stand as the only witness in his defense of him.

Scarlett Lewis was also called to the stand Tuesday.

Heslin and Lewis suffer from a form of post-traumatic stress disorder that comes from constant trauma, similar to that endured by soldiers in war zones or child abuse victims, a forensic psychologist who studied their cases and met with them testified Monday.

Jones has portrayed the lawsuit against him as an attack on his First Amendment rights.

At stake in the trial is how much Jones will pay. The parents have asked the jury to award $150 million in compensation for defamation and intentional infliction of emotional distress. The jury will then consider whether Jones and his company will pay punitive damages.

The trial is just one of several Jones faces.

Courts in Texas and Connecticut have already found Jones liable for defamation for his portrayal of the Sandy Hook massacre as a hoax involving actors aimed at increasing gun control. In both states, judges issued default judgments against Jones without trials because he failed to respond to court orders and turn over documents.

Jones has already tried to protect Free Speech Systems financially. The company filed for federal bankruptcy protection last week. Sandy Hook families have separately sued Jones over his financial claims from him, arguing that the company is trying to protect millions owned by Jones and his family from him through shell entities.



DOJ sues to block Idaho abortion law after Supreme Court tosses Roe

US Attorney General Merrick Garland announces enforcement actions against Russia, during a news conference at the Justice Department in Washington, US, April 6, 2022.

Elizabeth Franz | Reuters

The US Justice Department filed a lawsuit Tuesday seeking to block Idaho’s new restrictive abortion law on the grounds that it violates federal law requiring most hospitals to give medically necessary treatment to patients before discharging them.

It is the first Justice Department lawsuit to target a state’s new abortion restrictions adopted on the heels of the Supreme Court’s ruling in June, which said there is not a federal constitutional right to abortion.

That ruling reversed the Supreme Court’s 49-year-old decision in Roe v. Wade, which established the nationwide right of women to terminate their pregnancies.

Attorney General Merrick Garland held a news conference detailing the lawsuit.

The suit filed in Idaho federal court notes that the state “has passed a near-absolute ban on abortion,” which after taking effect Aug. 25 will make it a criminal offense to perform an abortion “in all but extremely narrow circumstances.”

Garland said the ban conflicts with the federal Emergency Medical Treatment and Labor Act, which requires a hospital that accepts Medicare funds to provide treatment at their emergency departments to stabilize a patient necessary to stabilize their medical condition before transferring or discharging the patient.

This is breaking news. Check back for updates.



University instructor charged in shooting death of student

CARROLTON, Ga. — A university instructor in Georgia has been charged with killing an 18-year-old student who was fatally shot while sitting in a car.

The Carrollton Police Department said in a news release that Richard Sigman, 47, is charged with murder and aggravated assault for the shooting death of Anna Jones, 18. Police said they believe Jones was killed when Sigman shot into a parked car following an argument with a man at a pizza restaurant. The shooting happened shortly after midnight Saturday.

Police said a man told security that Sigman had threatened to shoot him during an argument, and security then asked Sigman to leave. Investigators believe when Sigman left, he walked to the parking deck and started shooting into a parked vehicle, hitting Jones. Friends drove Jones to a hospital where she was pronounced dead, police said.

It is not immediately clear if Sigman has a lawyer to speak on his behalf.

The University of West Georgia told news outlets in a statement that Sigman’s employment has been terminated. A current course catalog listed Sigman as a lecturer in business administration.

The university said Jones was a student at the university.

“On behalf of the university, we wish to convey our deepest condolences to Anna’s family and many friends. We know this news is difficult to process and affects many members of our university community. We ask that you keep Anna’s family, friends, and all who have been touched by this tragedy in your thoughts during this tremendously difficult time,” University of West Georgia President Dr. Brendan Kelly said in the statement.