House Democrats hope to vote on Build Back Better this week. The House is still awaiting final cost estimates for the latest version of the social spending and tax bill. Because the House still is scrambling to pass the measure, the Senate will delay its consideration that had been scheduled for this week. Senate Majority Leader Chuck Schumer warns members to keep their schedules flexible through December 31.
TPC analysis: BBBA still raises taxes on high income households and reduces them for others. TPC’s new estimates of the latest version of the Build Back Better bill finds its major tax changes would cut taxes on average for nearly all income groups in 2022. But those in the top 1 percent, who make about $885,000 or more, would pay about $55,000 more in taxes than under current law. Those in the top 0.1 percent, who make at least $4 million, would pay an additional $585,000 on average, a 5.9 percent reduction in their after-tax income.
IRS makes big inflation adjustments for 2022. Because 2021 inflation has been so high, the IRS has made significant changes to tax brackets, the standard deduction the earned income tax credit, and other tax provisions. For example, the standard deduction for married couples will climb 3.2 percent to $25,900 in 2022. The 22 percent bracket will begin at $41,775 ($83,550 for married couples filing jointly). In 2021, the bracket started at $40,526 for single filers and $81,051 for joint filers.
GAO: Opportunity Zone program requires improved compliance. The Government Accountability Office released its report on the Opportunity Zone tax incentive program, enacted as part of the 2017 Tax Cuts and Jobs Act. It found that on average, governors selected communities with higher poverty and a greater share of non-White populations than areas that were eligible but not selected. But GAO said the IRS needs to be better aware of compliance risks posed by wealthy individuals and large partnerships who use the Opportunity Zones tax incentive. GAO also urged the IRS to improve data collection for the program.
Gale charts the economic and fiscal road ahead. In a Peterson Foundation paper, TPC’s Bill Gale argues for more public investment in education, health, childcare, nutrition, public infrastructure, and scientific research. “Investing more in children should be a high national priority, for both equity and efficiency reasons.” Can we afford such investment? Bill says yes: “The way to avoid catastrophic debt and still take advantage of current low rates is to raise taxes” by “reducing tax evasion, putting a price on carbon, and taxing capital income more comprehensively — particularly taxing capital gains at death, eliminating subsidies for unincorporated businesses, and providing a smaller estate tax exemption.”
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