Inflation Reduction Act Will Increase Taxes for Most People
Inflation is caused by too much money chasing too few goods. That means there are only two ways to reduce inflation: reduce the growth rate of the money supply or increase the growth rate of the economy. The act would do neither. In fact, by raising taxes and diverting resources from the productive private sector to the inefficient government sector, the act would reduce economic growth.
This is from David R. Henderson, “Inflation Reduction Act Will Increase Taxes for Most People,” TaxBytes, August 3, 2022, published by the Institute for Policy Innovation.
Fortunately, the Joint Committee on Taxation (JCT) has done its job, estimating the increase in taxes for people in each income group.
The $54.3 billion tax increase for 2023, the JCT estimates, won’t increase taxes for anyone with income between $0 and $30,000. But the JCT also points out that its measure of income includes not just adjusted gross income but also employer contributions to health insurance, the employer’s share of the Social Security tax (FICA), and the insurance value of Medicare benefits. So millions of people whose adjusted gross income is below $30,000 will pay somewhat higher taxes.
People with income up to $75,000 won’t pay much more. But people with income between $75,000 to $100,000 will see their average tax rate rise from 15.8 percent to 16.0 percent. The average tax rate for people with income between $100,000 and $200,000 will rise from 19.1 percent to 19.4 percent, and between $200,000 and $500,000 will rise from 24.1 percent to 24.4 percent.
Read the whole thing, which is quite terse.