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Heritage: The Inflation Reduction Act

Preston Brashers, Senior Tax Policy Analyst at Heritage Foundation has a new report out on the Inflation Reduction Act. Passed last year through budget reconciliation, critics of the law claim it will do the total opposite of what it’s name implies.

The Inflation Reduction Act (IRA), signed into law by President Joe Biden in August 2022, was initially intended to address the pressing issue of inflation. However, by the time most of its provisions took effect in January 2023, inflation had already started to decline due to aggressive actions taken by the Federal Reserve. Despite its name, experts argue that the IRA is unlikely to have a significant impact on inflation and may even contribute to price pressures through 2024. Even Senator Bernie Sanders, a supporter of the bill, acknowledged its minimal effect on inflation.

The law’s taxes and spending provisions are now being evaluated including claims about the law include reducing the deficit, cracking down on tax evasion by the wealthy, maintaining a fair tax burden on the middle class, ensuring corporate tax fairness, and addressing climate change.

However, doubts have been raised regarding these claims. Critics argue that the law could lead to higher deficits and inflation in the near term, burden the middle class through ambitious revenue targets for the IRS, and provide generous tax breaks for green-energy and utility companies with minimal impact on climate change.

Brashers contends:

The IRA will not accomplish much of what is claimed by its supporters. It will, however, centralize even more power in the federal government. It will impose higher taxes on businesses and individuals. It will pile on new federal spending and grant subsidies and government loans to favored industries. It will expand the IRS, complicate the tax code, and promulgate harmful regulations that will inhibit innovation. Congress should repeal this misguided legislation and get out of the business of picking winners and losers in the economy.