There has been movement in Washington, D.C. on a proposal to purportedly combat inflation, climate change, and health care. In addition, the proposal includes revenue-raising tax provisions to fund the spending.
The legislative text for the Inflation Reduction Act of 2022 was released yesterday. At a high level, the tax provisions include:
- 15% corporate minimum tax on corporations with profits in excess of $1B
- Modification of carried interest tax treatment
- Tax incentives for clean energy
- Extension of enhanced premium subsidies for some under the Affordable Care Act
In addition, $80MM is allocated to fund IRS compliance and enforcement.
The proposal was announced jointly by Senate Majority Leader Schumer and Senator Joe Manchin. Given the very narrow margin by which the Democrats hold control of the Senate, Senator Manchin’s vote is critically important to the success or failure of any legislation. The proposal allocates a portion of the revenue raised toward deficit reduction, which has been a priority for Senator Manchin. What is not known, however, is whether the other key Democratic vote, Senator Kyrsten Sinema, is on board as well.
Senator Schumer has indicated an aggressive timetable for this proposal – targeting an introduction to the Senate next week. There do not appear to be any provisions related to changes in individual income taxes or estate taxes in the proposal. In fact, the legislative language specifically states “NO TAX INCREASES ON CERTAIN TAXPAYERS.—Nothing in this subsection is intended to increase taxes on any taxpayer with a taxable income below $400,000.”
This proposal represents the first real movement on the tax front since the end of last year and we will be watching it closely. As we have a chance to dig into the details further, and as the inevitable debate over the provisions gets underway, we will provide updates on meaningful changes.
