Loading ...
Optimism for Contractors in the Inflation Reduction Act
Authored by Perry McGowan : Professionals : CLA (CliftonLarsonAllen) (claconnect.com)
In a July 27th surprise, Senate Democrats reached an intra-party deal with Senator Joe Manchin (D. West Virginia) for proposed tax and economic legislation under the name Inflation Reduction Act of 2022. The Act still has a full gamut of process to navigate in the Senate, followed by the House, but if passed, it represents a meaningful downstroke on President Biden’s tax agenda, Manchin’s deficit reduction initiatives, and energy and healthcare priorities.
Effectively an offshoot of the long-stalled $4 trillion Build Back Better legislation (but only a fraction of the size), the IR Act targets a net deficit reduction managed through a combination of tax increases on the largest US public corporations and Medicare negotiating authorization on selected prescription drugs. The Act would offer about $370 billion in energy and climate focused funding over a 10-year horizon and yield about $300 billion in deficit reduction.
The debits and credits are estimated as follows:
Revenue Raisers:
15% Corporate Minimum Tax $313B
Medicare Reforms of Prescription Drug Pricing $288B
IRS Tax Enforcement $124B
Taxing “Carried Interests” as ordinary income $14B
Total Revenues Raised $739B
Expenditures:
Energy Security and Climate Change $369B
Affordable Care Act Extension $64B
Total Expenditures $433B
Net Deficit Reduction $306B
We note that the large revenue hits above fall on a few hundred large C corporations, making more than $1 billion annually, that would face the minimum tax, and prescription drug makers that would lose drug pricing flexibility. The construction industry dodges the largest revenue burdens but may see benefits from the proposed expenditures around energy and climate. Watch for future updates to some of the construction specific components of this proposed legislation.
