August 8, 2022

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

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Jim Watson | 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 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 Urban-Brookings 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, D-N.Y., and Sen. Joe Manchin, D-W.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…

2022-08-05 20:24:11

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