Senior Policy Analyst, Tax Policy
Preston is a Senior Policy Analyst for tax policy in The Heritage Foundation’s Grover M. Hermann Center for the Federal Budget.
SUMMARY
The tax and spending provisions in the Inflation Reduction Act have several stated objectives. Supporters argue the law will reduce the deficit and inflation, crack down on rich tax cheats without adding to the middle-class tax and audit burden, make big corporations pay their fair share, and reduce global emissions and climate change. These claims are dubious. The law will drive higher deficits and likely contribute to higher inflation in the near term. Goals for revenue collections from new audits will be impossible for the IRS to achieve without hitting the middle class. Generous tax breaks for green-energy and utility companies will expand the tax advantages of the most subsidized companies, while having a negligible impact on the climate.
KEY TAKEAWAYS
The Inflation Reduction Act will likely increase the deficit and add to inflationary pressure, especially in the near term.
The law’s massive boost in IRS funding was predicated on a measure of unpaid taxes that is flawed and exaggerated.
The legislation will dramatically expand taxpayer subsidies to the least taxed businesses—green companies—allowing them to skirt the law’s new minimum tax.