A bipartisan group of former Treasury chiefs has issued a statement in support of the new Democratic inflation legislation.
The statement is signed by Timothy Geithner, Jacob Lew, Henry Paulson, Robert Rubin, and Larry Summers and comes as Republicans tear into the legislation by arguing that it would not meaningfully reduce inflation and would rather result in higher tax burdens for middle-class workers.
“This legislation will help increase American competitiveness, address our climate crisis, lower costs for families, and fight inflation — and should be passed immediately by Congress,” the group wrote.
The legislative proposal championed by Sens. Joe Manchin (D-WV) and Chuck Schumer (D-NY), dubbed the Inflation Reduction Act, would levy a 15% minimum tax on the book income of companies.
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The United States now has a 21% corporate tax rate, which it assesses based on companies’ tax returns. The new plan would assess a minimum 15% tax on the adjusted financial statement income of corporations, something Democrats contend would raise $313 billion in new tax revenue.
But Republicans have pushed back on the bill, particularly the book tax. A Joint Committee on Taxation analysis found that because of increased taxes on corporations, people in every tax bracket would suffer losses and that the overall tax burden for those earning less than $200,000 annually would increase by $16.7 billion in 2023.
Republicans charge that the increased financial burden violates President Joe Biden’s campaign promise not to raise taxes on anyone making less than $400,000 annually. In their statement, the Treasury secretaries point out that the plan doesn’t include directly taxing those earning under that threshold.
“And the extra taxes levied on corporations do not reflect increases in the corporate tax rate, but rather the reclaiming of revenue lost to tax avoidance and provisions benefitting the most affluent,” they said. “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.”
The missive from the former Treasury chiefs comes after current Treasury Secretary Janet Yellen sent letters to congressional leaders in both parties this week asserting that the legislation would have “no effect” on the tax liability of those earning less than $400,000.
“This minimum tax will prevent corporations from reporting little or no income on their tax returns, and paying little tax, while at the same time reporting much higher income to their shareholders on their financial statements,” she said.
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In addition to the book tax, the proposal would also raise taxes on carried interest, a form of income earned by private equity funds that is subject to a lower tax rate, and bolster IRS enforcement in order to close the tax gap and recoup revenue.
Even though Manchin, who is often the swing vote in budget matters, is on board with the plan, there are questions as to whether fellow centrist Sen. Kyrsten Sinema of Arizona will offer her support.
