Politics: Democrats' proposed tax hikes probably won't affect you — in fact, they'll help you buy an electric vehicle and put solar panels on your house

Leftovers pile up for year-end tax bill menu

  Leftovers pile up for year-end tax bill menu Incentives for clean energy and a tax break for companies’ research and development appear to be off the table for legislation moving this summer, raising the stakes for a potential year-end tax bill after the dust settles on the midterm elections. “I think there’s a commitment that we’re going to have to have some tax […] The post Leftovers pile up for year-end tax bill menu appeared first on Roll Call.

Senate Majority Leader Chuck Schumer and Sen. Joe Manchin Drew Angerer/Getty Images © Provided by Business Insider Senate Majority Leader Chuck Schumer and Sen. Joe Manchin Drew Angerer/Getty Images
  • Sen. Manchin's surprise spending bill would put billions toward the climate and prescription drug prices.
  • The bill, aimed at reducing inflation, is paid for by taxes on corporations and wealthy investors.
  • Most taxpayers won't see a change, and might even get some rebates for energy efficiency.

It was the deal heard around the world: Sen. Joe Manchin, a centrist Democrat who wields his majority-making vote to heavily influence Democrats' agenda, had negotiated a package with Senate Majority Leader Chuck Schumer.

Schumer, Manchin agree on billions of dollars for electric vehicles, solar panels and other clean-energy priorities

  Schumer, Manchin agree on billions of dollars for electric vehicles, solar panels and other clean-energy priorities Senate Majority Leader Charles Schumer (D-N.Y.) and Sen. Joe Manchin (D-W.Va.) have agreed to spend billions of dollars to accelerate the production of electric vehicles, solar panels, wind turbines and to provide other incentives to bolster the clean-energy economy. Schumer announced the details of a $369 billion energy-and-climate deal Wednesday, which Democrats plan to include…Schumer announced the details of a $369 billion energy-and-climate deal Wednesday, which Democrats plan to include in a budget reconciliation package scheduled for the floor next week.

The Inflation Reduction Act of 2022 is, as the name suggests, aimed at bringing down inflation. It would put billions towards climate spending and slash prescription drug prices. Rather than hiking taxes on individuals, or imposing a broad surtax on the ultra-wealthy — both previously proposed to cover spending — the package is narrowly targeting ultra-wealthy investors and corporations, while also stepping up IRS enforcement. That income will help pay for assistance to Americans who want to buy electric vehicles or make energy efficient upgrades to their homes.

"We will pay for all of this by requiring big corporations to pay their fair share of taxes, with no tax increases at all for families making under $400,000 a year," President Joe Biden said in a statement.

Economists largely say the vast majority of Americans are spared from tax increases under the legislation. Democrats have sought to wall off most families except the very richest ones from getting hit with new taxes.

Kimberly Clausing, a former senior Treasury Department official, said the average American's tax bill is "absolutely" not going to be affected under the legislation.

"Are you a tax cheat? If not, the IRS money won't affect you," Clausing, a tax professor at the UCLA School of Law, told Insider. "Are you a big corporation that earns over a billion dollars and pays less than 15%? If not, there's no increase in your taxes."

However, Democrats intend to close the carried interest tax break that allows hedge fund managers and venture capitalists to pay a lower tax rate on income made from their investments. That provision would only impact investors making over $400,000.

"For the person at home, it's not going to raise their taxes. It's a loophole closer for very highly paid people who buy and sell companies," Samantha Jacoby, a senior legal tax analyst at the Center on Budget and Policy Priorities, told Insider.

Closing the carried interest loophole seems to be a strong priority for Manchin. The West Virginia senator name-checked it in an interview with West Virginia reporter Hoppy Kercheval.

But Republicans assailed the measure, and think that fellow Democratic centrist Sen. Kyrsten Sinema — who has repeatedly drawn the line on tax hikes — may pour cold water on the measure.

"It's sort of funny for carried interest to be the tail wagging the dog, because it's a relatively modest revenue component of the overall package,"  Steve Rosenthal, a senior fellow at the Tax Policy Center, told Insider.

For most taxpayers, the package actually contains credits to incentivize clean energy adoption. Taxpayers would be able to get thousands in rebates for energy efficient home improvements, such as electric heat pumps, stoves, and solar panels.

They also stand to qualify for tax credits that cut the cost of purchasing an electric vehicle. Under the bill, Americans qualify for a $4,500 tax credit to buy used electric vehicles, depending on their annual income. For new EV's, the amount increases to $7,500.

Read the original article on Business Insider

Carried interest provision is cut from Inflation Reduction Act. How this tax break works, and how it benefits high-income taxpayers .
A proposed tax tweak to carried interest, compensation paid to private equity and hedge fund managers, didn't survive in the final Inflation Reduction Act.But one proposed tweak to the tax code — a modification of so-called carried interest rules — didn't survive due to objections from Sen. Kyrsten Sinema, D-Ariz., whose support was essential to pass the Inflation Reduction Act in an evenly divided Senate. The bill now heads to the House, which is expected to pass it this week.

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