News and Analysis

Biden’s Inflation Bill Raised Taxes On Businesses. Here Are The Industries That Will Suffer The Most.
WASHINGTON, DC - JUNE 25: U.S. President Joe Biden signs the Bipartisan Safer Communities Act into law in the Roosevelt Room of the White House on June 25, 2022 in Washington, DC. The legislation is the first new gun regulations passed by Congress in more than 30 years.
Tasos Katopodis via Getty Images

The Inflation Reduction Act, which President Joe Biden is poised to sign on Tuesday, will raise taxes on companies by a net $197 billion over the next decade.

The 15% book minimum tax enacted under the new legislation has differing effects across multiple industries, according to a Friday analysis from the Tax Foundation, which explained that the provisions “would have distortionary impacts on investment, and may prove ineffective as a stable revenue raiser.”

Companies in real estate and leasing will face $11 billion in new taxes, representing 12.7% of the sector’s total pretax income — the highest of any other industry. Yet real estate has seen dramatic cost increases over the past two years, with average single-family home prices rising from $322,600 in the second quarter of 2020 to $433,100 in the first quarter of 2022, according to data from the Department of Housing and Urban Development.

Beyond real estate, the mining, construction, and transportation and warehousing sectors will respectively lose 4.6%, 3.2%, and 1.8% of pretax income.

“These industries are especially heavily impacted because they are at the intersection of the different book-tax gaps targeted by the book minimum tax,” according to the analysis, which specifically noted “temporary timing differences between financial and taxable income” and “deliberate tax incentives created by Congress and special items that show up in one income definition but not the other.”

Though the Inflation Reduction Act does not alter the corporate tax, companies will see their average effective tax rates rise from 18.7% to 19.3%, with utilities and agriculture seeing effective tax rates increase from 14.7% to 23.3%. Food prices faced by consumers, however, have risen 10.9% between July 2021 and July 2022, according to the Bureau of Labor Statistics.

“The book minimum tax affects industries very differently, some of which may be unintended, reflecting a tax proposal that has not been fully vetted,” the analysis observed.

The Inflation Reduction Act carries a $740 billion price tag — including $369 billion to combat “the existential crisis of climate change,” according to recent remarks from Biden. Yet a study from economists at the University of Pennsylvania’s Wharton School found that the Inflation Reduction Act would “very slightly increase inflation” over the next two years and “decrease inflation thereafter,” with both estimates “statistically indistinguishable from zero, thereby indicating low confidence that the legislation will have any impact on inflation” despite its high price tag.

The legislation also includes $80 billion in funds to hire 87,000 new Internal Revenue Service employees — a provision that top Biden administration officials claim will not be used to increase audits for taxpayers or small businesses earning less than $400,000.

“I direct that any additional resources — including any new personnel or auditors that are hired — shall not be used to increase the share of small business or households below the $400,000 threshold that are audited relative to historical levels,” Treasury Secretary Janet Yellen told IRS Commissioner Charles Rettig in a recent letter. “This means that, contrary to the misinformation from opponents of this legislation, small business or households earning $400,000 per year or less will not see an increase in the chances that they are audited.”

A preliminary assessment from the Congressional Budget Office, however, confirmed that at least $20 billion of the projected $124 billion in new revenue the new IRS assets are slated to collect will come from the middle class.

According to the Republicans on the House Ways and Means Committee, the new employees would have the capacity to execute 1.2 million more individual audits per year, with nearly half impacting Americans earning less than $75,000.

Create a free account to join the conversation!

Already have an account?

Log in

Got a tip worth investigating?

Your information could be the missing piece to an important story. Submit your tip today and make a difference.

Submit Tip
Download Daily Wire Plus

Don't miss anything

Download our App

Stay up-to-date on the latest
news, podcasts, and more.

Download on the app storeGet it on Google Play
The Daily Wire   >  Read   >  Biden’s Inflation Bill Raised Taxes On Businesses. Here Are The Industries That Will Suffer The Most.