If enacted, the Inflation Reduction Act of 2022 currently being considered by Congress would throttle American manufacturing and macerate an industry vital for Pennsylvania’s economic growth, experts say.
“The proposed Manchin-Schumer deal would hit manufacturers and capital-intensive industries particularly hard during a time of historic inflation, and is a step in the wrong direction,” the Pennsylvania Chamber of Business and Industry tweeted this week.
Now is not the time to raise taxes on American businesses — especially after capital-intensive operations like manufacturers made good on the promises of the Tax Cuts and Jobs Act to invest and expand domestically, the chamber pointed out.
Numerous sources specifically oppose the proposed bill’s provision requiring corporations to pay a 15 percent minimum tax on the income they report to their shareholders. This so-called “book tax” is a new alternative minimum tax that is applied to the financial statement income, or book income, that companies report to their investors, according to the Tax Foundation, an independent tax policy nonprofit based in Washington, D.C.
American manufacturers would take the hit for 49.7 percent of this tax, according to the congressional, non-partisan Joint Committee on Taxation.
“None of this is good,” Taylor told Pennsylvania Business Report. “Rather than reduce burdens on manufacturers so they can better cope with the recession and compete in the marketplace, the Biden administration intends to accelerate the spending spree that has let loose the worst inflation in 40 years.”
Taylor also cited data from the National Association of Manufacturers, which found that the tax would destroy over 218,000 American jobs and reduce U.S. GDP by $68 billion.
U.S. Senate Finance Committee Ranking Member Mike Crapo (R-ID) earlier this week, said, “The more this bill is analyzed by impartial experts, the more we can see Democrats are trying to sell the American people a bill of goods. Non-partisan analysts are confirming this bill raises taxes on the middle class, raises taxes on manufacturers, and produces no meaningful deficit reduction when gimmicks are removed and the full cost is accounted for.”
U.S. Sen. Rob Portman (R-OH) agreed during Aug. 2 remarks he made on the Senate floor. Portman outlined the consequences of the “book tax” on manufacturing and voiced concerns about the new tax hike, saying it undermines business investment and job creation and raises prices for working families already facing skyrocketing inflation.
“As part of these tax hikes, manufacturing is hit particularly hard,” the senator said, pointing to the Joint Committee’s report that about 50 percent of the impact of the tax increase is going to be on manufacturing businesses.
“Now, this is interesting to me because we just passed a big bill, some call it the CHIPS bill, some call it the China bill, some call it the competition bill, but it’s a bill to focus on making our American companies more competitive, particularly our manufacturing companies,” Portman said. “And we’re spending a lot of money, hundreds of billions of dollars to do that and here we’re saying, ‘No we’re going to increase taxes on those manufacturing businesses.’”
In fact, the book tax has disparate impacts across industries and companies, according to the Tax Foundation, which says the automobile, coal and utilities industries all would face larger tax bills under the proposal.
“The book tax would arbitrarily penalize companies for past losses,” Tax Foundation experts said Friday. “Many companies, and very clearly many of this country’s most successful companies, incurred losses for several years before earning profits.”
U.S. Rep. Kevin Brady (R-TX), ranking member on the U.S. House Ways and Means Committee, on Aug. 2 released a statement also saying that nearly half of the revenue raised from the bill’s proposed tax increases would come from already struggling American manufacturers.
“These factories have also struggled through President Biden’s labor shortage: A year and a half into the Biden administration, America is still 524,000 jobs short of the jobs we had prior to the pandemic,” Brady said. “At a time when Americans are already struggling with record-high prices, now is not the time to raise taxes that will further burden working families with higher prices, fewer jobs, and lower wages.”
Meanwhile, the Institute on Taxation and Economic Policy said that the pending bill’s provision would not negatively impact U.S. manufacturers and supply chains. The nonprofit, non-partisan think tank said on Aug. 2 that the bill would actually help manufacturing in the United States. “What’s more, there is no reason that companies in any sector should be allowed to avoid taxes,” according to the group.
U.S. Sen. Kyrsten Sinema (D-AZ), whose support for the bill was needed to pass it in an evenly split Senate, said Thursday that she plans to “move forward” with a revised version of the Democrats’ reconciliation bill.
“We have agreed to remove the carried interest tax provision, protect advanced manufacturing, and boost our clean energy economy in the Senate’s budget reconciliation legislation,” Sinema said in a statement released Thursday. “Subject to the Parliamentarian’s review, I’ll move forward.”
President Joe Biden also on Thursday called on Congress to pass the legislation. “The $739 billion package can help lower inflation, cut the budget deficit, address climate change and lower medical bills,” Biden said during a roundtable he hosted with business leaders on Thursday.
Pennsylvania Gov. Tom Wolf (D) on Friday released a statement thanking President Biden and congressional Democrats for introducing the Inflation Reduction Act.
“Right now, Pennsylvanians and their families are hurting from inflation,” Wolf said. “As prices have gone up, paychecks have had to stretch further than ever to cover the higher cost of food, rent, medicine, and more. Working families are bearing the brunt of inflation — and that’s why we need the Inflation Reduction Act.”
According to U.S. Sen. Majority Leader Chuck Schumer (D-NY), the Senate on Saturday will vote on a measure to advance the reconciliation bill and then lawmakers will be able to propose and vote on potential amendments as Democrats rush to pass the final version next week before leaving for their August recess.