MORGANTOWN – Sens. Joe Manchin and Shelley Moore Capito are not unexpectedly on opposite sides of the Inflation Reduction Act. Both aired their views Thursday in separate virtual meetings with members of the West Virginia press.
Capito calls it a “reckless tax and spending bill veiled as an inflation reducer.” Manchin said, “I’m excited because I really think we’ve got a chance to really turn around not only our economy but kill inflation.”
The act – called the IRA for short – proposes to raise $739 in revenue over 10 years. It creates a 15% minimum corporate tax for companies recording more than $1 billion in revenue, bringing in an estimated $313 billion. It allows Medicare to negotiate prescription drug prices, with an estimated $288 billion savings.
It puts $80 billion into Internal Revenue Service enforcement to net $124 billion in additional tax collections. And it closes a carried interest loophole that allows investment fund managers to take the same tax deduction as the investors, netting $14 billion in collections.
The IRA then projects $433 billion in spending: $369 billion in energy and climate measures and $64 billion to extend Affordable Care Act subsidies another three years.
Weighing spending against revenue, it projects deficit reduction just north of $300 billion.
Climate measures include various green energy and energy storage tax credits, a $7,500 credit to buy an electric vehicle, a methane emissions fee for oil and natural gas producers, environmental and climate justice block grants and more.
The bill will pass through the reconciliation process, which bypasses the filibuster and allows it to pass by simple majority with no GOP support.
Views on the bill’s effects vary. Supporters say no one making less than $400,000 per year will see a tax hike.
But the Congressional nonpartisan Joint Committee on Taxation says nearly every tax bracket will see some kind of tax hike, with more than half of the tax increases on Americans making less than $400,000 per year. Taxes will increase by $16.7 billion for those earning less than $200,000.
The Tax Policy Center says the $300 billion deficit reduction is relatively measly compared to the Congressional Budget Office’s projected $16 trillion deficit over the next decade. “Will it slow inflation as its title promises? Perhaps, but probably not by very much.”
The Tax Foundation takes an even dimmer view, saying the IRA would reduce long-run economic output by about 0.1% and eliminate about 30,000 full-time equivalent jobs in the United States.
It would also reduce average after-tax incomes for taxpayers across every income bracket over the long run, the foundation said. “By reducing long-run economic growth, this bill may actually worsen inflation by constraining the productive capacity of the economy.”
The University of Pennsylvania’s Penn Wharton Budget Model said of the bill, “The impact on inflation is statistically indistinguishable from zero.” In fact, it could spur further inflation through 2023.
One more blow against the bill is the Congressional Budget Office’s score, which lowers the projected deficit reduction to $102 billion.
Manchin and Sen. Krysten Sinema, D-Ariz., were the road blocks to President Biden’s Build Back Better plan; IRA is a stripped-down Mini Me version Manchin Negotiated with Majority Leader Chuck Schumer.
Manchin has touted IRA’s benefits for West Virginia, and on Thursday noted that the left slammed him for opposing BBB, while the right is now slamming him for IRA.
“It’s unbelievable how you can be the hero one day and the villain the next,” he said. “The opportunity for West Virginia is unbelievable.” And seeing that neither side is happy means it could be a good compromise. “Maybe we’re in the sweet spot.”
Its measures, he said, include tax credits and direct pay to help fossil fuel plants, and a $5 billion energy infrastructure reinvestment financing program that can help existing coal-powered plants perform upgrades.
The West Virginia Coal Association and the United Mine Workers of America have taken opposing views on the bill.
The Coal Association joined with other state associations to complain in a letter, “The Schumer-Manchin bill doubles the current tax on coal and subjects mining companies to the highest tax of any other American business effectively costing mining companies tens of millions of dollars in new taxes.”
The doubled tax they mention is the Black Lung coal excise tax of 55 cents per ton for surface-mined coal, $1.10 per ton for underground. The tax had lapsed in 2021 and the bill restores it.
The UMWA praises the restoration of the tax. “Black Lung is caused by breathing too much coal and silica dust, which only happens when coal operators do not follow the law with respect to how much dust is in the atmosphere of a mine. Scofflaw coal companies are the culprits, and asking them to pay 50 cents more per ton of coal that is used domestically is only right, especially at a time when they are selling their coal for unprecedented high prices.”
Manchin agrees with the UMWA on this and responded to the coal association’s in a Thursday letter. “The argument that this is a new tax is a lie. As you and your members well know, each and every coal company has and will continue to budget for this tax each and every year.”
He told West Virginia press members on Thursday that this measure is nothing more than the companies paying their fair share in a period when they’re seeing record profits.
Manchin also addressed those objecting to the 15% corporate minimum tax. During the Trump era the tax was lowered from 35% to 21%, and there are 55 U.S. companies paying nothing. “There’s just not a fairness to the system.”
The measure will affect only 200 companies, none in West Virginia and no coal companies, he said. “It’s not going to harm anybody. … We’ve never had a more balanced bill.” It will help our fossil fuel energy, which in turn will help our allies, and reduce European dependence of dirty Russian energy.
This is not a Blue Democrat deal or a Green environmental leftist deal, he said. “This is a red, white and blue deal.” It helps meet current energy demands while investing in and maturing energies needed for the future.
“The only way you’re going to kill inflation is to produce your way out of it,” he said. Raising interest rates to discourage spending will keep inflation lingering as people stay out of market.
Capito said Congress should be focused on addressing the 9.1% inflation rate. “Instead were focusing on spending more money and taxing more.” And hiring 80,000 more IRS agents to come after small businesses and average earners.
A review of nonpartisan analyses assembled by Senate Finance GOP staff estimates that 40% to 57% of the new IRS revenue will come from those making less than $50,000; 65%-78% making less than $100,000; only 4% to 9% form those making more than $500,000.
Capito said the bill’s tax hikes and costs will affect all sectors of the economy: internet service, transportation, food, fuel. Higher tax bills get passed to consumers, including the tax bills the 15% minimum tax the bill will establish. “West Virginians will pay higher prices. … We’re all getting touched by all this.”
She characterized many of the bill’s climate provisions as Green New Deal, taking the abrupt approach to energy transition favored by the progressive left. “I’m all about transitions,” she said, but it has to be a continued measured approach reflected in legislation already passed in recent months and years.
Areas of agreement
Manchin and Capito both have opposed the Biden administration’s ongoing pipeline construction roadblocks, and Manchin insisted that Congress pass expedited permitting processes for infrastructure projects, including energy infrastructure.
Manchin said Thursday that his agreement to this bill was contingent on expedited permitting passing. Capito expressed septicemic, noting a vote on that isn’t coming until September.
Both were pleased that the Senate approved – 50-47 – a test vote on the issue Thursday, in the form of a resolution expressing disapproval of the Biden administration’s proposed rule relating to the National Energy Policy Act to further hinder permitting.
Capito said on the Senate floor, “This resolution is vital to return us to a path towards quicker, more predictable environmental reviews as we seek to improve our transportation, water and energy infrastructure, reclaim our energy independence, and build out our domestic supply chains.
“Instead of making the environmental review process more efficient,” she said, “the Biden administration has been doing everything in its power to make it more difficult. Environmental reviews are notorious for holding up energy and infrastructure projects for years.”
Manchin commented, “For years I’ve worked to fix our broken permitting system and I know the administration’s approach to permitting is dead wrong. Today’s vote to repeal these burdensome NEPA rules is a step in the right direction, but unfortunately this legislation is dead on arrival in the House of Representatives. That’s why I fought so hard to secure a commitment on bipartisan permitting reform, which is the only way we’re going to actually fix this problem.”
Manchin and Capito both answered a question on how their divide over this bill will affect their relationship, since they work together more often than not.
Capito said, “We agree to disagree. They’ve had stark differences in the past and this won’t influence their relationship going forward.
Manchin said, “So much good is coming” from the bill for West Virginia and he hopes she can see the fruit of it. “I respect where she’s coming from. She’s my friend.”
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