While the Inflation Reduction Act of 2022 looks good on paper, it will actually do more harm than good if it passes. The plan would hurt working-class taxpayers and small business owners across the country.
Taxes, Taxes, Taxes
The act introduces the “corporate alternative minimum tax,” which compels a 15% tax on corporate income. The goal is to increase the taxes imposed on certain high-income earners. It will also bolster enforcement mechanisms within the IRS.
Most people have no desire to see their taxes increase on most days, but certainly not in a recession. While the White House says it intends to make the top 1% pay for these expanded government programs (like the IRS), the stark reality is that it will barely affect those at the top. The expansion only serves to hurt the middle class.
The IRS Gets a Power-up
The additional funding the government intends to give the IRS will total $80 billion over the next decade. This rapid expansion would mean that the IRS would double in size and put up to 87,000 new agents on the playing field. Adding new agents means more audits on small businesses and middle-class taxpayers across the country. There are already over 600,000 annual audits performed, but with the expansion, the IRS could perform an additional 1.2 million audits. Audits have historically affected low-income earners disproportionately. And we all know those extra 1.2 million audits won't be just on billionaires.
The IRS Goes Ghost
This enormous investment in enforcement infrastructure comes at a time when it is already tricky to even get in contact with the IRS. The agency reported that it only answered around 10% of the calls it received during the previous tax year.
The Billionaires Are Shaking in Their Boots…not
Despite the government hype around this enforcement plan, it is unlikely that this investment will even be able to raise the $700 billion projected. And none of the country's billionaires will be even breaking a sweat. When you can afford the best accountants and lawyers, there's no need to worry about silly government expansions. Fancy lawyers and expensive accountants are a luxury that lower class individuals are seldom able to afford, which puts them squarely in the line of fire.
Money for Me, Not for Thee
The extra investment in the IRS' enforcement will undoubtedly raise some extra coin for the federal government. But instead of “taxing the rich,” the hardworking middle-class entrepreneurs will be the ones made to suffer. So while the Dems on the Hill will be celebrating a tax hike on an unlucky few, we mere mortals will need to be wary and stay alert.
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This article was produced and syndicated by Wealth of Geeks.
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