The Inflation Reduction Act of 2022 is a much scaled-down version of the sweeping tax and climate change bill that was initially introduced in Congress. The bill leaves out tax increases on wealthy individuals, changes to close estate planning loopholes, estate tax increases and even the SALT cap changes that many expected.
Instead, the bill would impose a corporate alternative minimum tax of 15% on domestic corporations with profits that exceed $1 billion. The tax would be imposed on the corporation’s adjusted financial statement income. The bill would also create new tax credits designed to combat climate change while extending and enhancing some existing energy tax credits.
To raise revenue, the law would also increase IRS funding by $80 billion over a 10-year period to increase enforcement and compliance.
We asked two professors and authors of ALM’s Tax Facts with opposing political viewpoints to share their opinions about the Inflation Reduction Act of 2022.
Below is a summary of the debate that ensued between the two professors.
Byrnes: This new legislation takes a much more reasonable and measured approach than prior incarnations. That said, the plan to impose a 15% corporate minimum tax on businesses with at least $1 billion in revenue is likely to backfire and add to our current economic uncertainty. But this legislation does not raise taxes at the individual level, which would have been devastating given the current inflationary environment. All in all, the compromise position it takes is something we can all live with.
Bloink: This legislation does nothing to make sure wealthy Americans are paying their fair share. By agreeing to such a scaled-down proposal, we’re allowing tax loopholes and techniques designed to manipulate taxable income to continue indefinitely. Democrats need to take action now, while we have the opportunity, to pass a much more comprehensive and detailed tax bill that will fund the climate change initiatives we need today.