Tax Guy: Will the Inflation Reduction Act help middle-class taxpayers?

0
21

The Inflation Reduction Act gives the IRS $79.6 billion to be spread over 10 years. Some $45.6 billion of that would be directed towards enforcement of corporations and wealthy individuals. Put bluntly, that means more audits.

Of the $79.6 billion, only $3.2 billion would be directed towards taxpayer services, like helping you out on the phone when you have questions or a problem. 

Some $4.8 billion would be directed towards business system modernization, which would include upgrading systems used to administer taxpayer services. 

The Inflation Reduction Act also calls for hiring 87,000 new IRS employees over 10 years, which would almost double the agency’s workforce. The Treasury Department has said these will cover an array of new roles, customer service representatives, IT workers, and auditors. 

The White House says the Inflation Reduction Act will result in $124 billion savings over 10 years, generated from collecting taxes “already owed by wealthy people and large corporations, according to the Congressional Budget Office. And no family making less than $400,000 will see their taxes go up a penny.”

The Inflation Reduction Act, signed into law by President Biden on Tuesday, said the top 1% of earners are estimated to evade $160 billion each year in taxes, and the White House said that “55 of America’s largest, wealthiest corporations that got away without paying a cent in federal income taxes in 2020.”

Is it reasonable to believe that the IRS will gracefully absorb massive new funding and new employees? It will take time. That would be daunting even in the private sector.

The act primarily targets big business and the wealthy. “Over the long run, the Inflation Reduction Act would raise marginal income tax rates faced by higher earners and corporations,” according to the right-leaning Tax Foundation, a Washington, D.C.-based think tank.

“The proposals would increase the after-tax income of the bottom quintile by about 2.1% in 2023 on a conventional basis, largely due to expanded health-care subsidies,” it said.

“The top 1% of earners would experience a 0.1% increase in after-tax income in 2023, driven by expanded energy tax credits that offset reduced incomes from the corporate book minimum tax and the tax on share repurchases,” the Tax Foundation added.

After the expanded health-care subsidies expire in 2026, “the bottom 20% of filers would see a smaller increase in after-tax incomes, reflecting the remaining expanded credits,” it added. “The bottom quintile would experience a 0.2% increase in after-tax income by 2032 on a conventional basis.”

The agency said its full-time head count last year was almost 79,000, a roughly 13% decrease from its size in 2012, while the U.S. population increased by roughly 8% over that span, MarketWatch reporter Andrew Keshner recently wrote.

Advice: Is it reasonable to believe that the IRS will gracefully absorb massive new funding and 87,000 new employees? It will take time. That would be daunting even in the private sector where market forces are at play.

This article was originally published by Marketwatch.com. Read the original article here.

Previous articleFacebook parent Meta to restrict political advertising in week before midterms
Next articleVirgin Voyages gets $550 million in backing from BlackRock, Bain Capital

LEAVE A REPLY

Please enter your comment!
Please enter your name here