Senate Majority Leader Chuck Schumer, D-N.Y., and Sen. Joe Manchin, D-W.Va., unveiled the outline of a new tax, climate and health care proposal on Wednesday.
The reconciliation bill — repackaged by Democrats as the Inflation Reduction Act of 2022 — would raise an estimated $739 billion over the next decade, with the revenues going toward initiatives designed to combat climate change and curb pharmaceutical prices, as well as efforts to reduce the nation’s $30 trillion debt. It includes about $433 billion in new spending, while roughly $300 billion of the new revenue raised would go toward paying down the nation’s deficit.
Here is a closer look at the tax increases and other items included in the latest legislation:
The legislation would impose a 15% minimum tax on the book income of corporations. The tax would hit the profit that corporations publicly report on their financial statements to shareholders. Democrats said the levy would affect around 200 of the country’s largest corporations — with profits exceeding $1 billion — that pay less than the current 21% rate for businesses.
Under the bill, the government would have the power to negotiate with drug makers in order to lower prices for certain prescription drugs. The proposal would cap what seniors on Medicare pay out of pocket for drugs each year at $2,000. If pharmaceutical companies raise the prices of their drugs more than the rate of inflation, pharmaceutical companies would be required to rebate Medicare.
The Internal Revenue Service would receive $80 billion in order to enhance tax enforcement by hiring more agents and introducing new technology to pursue tax dodgers. Democrats expect a beefed-up IRS to add an extra $124 billion in revenue by cracking down on tax evasion by wealthy individuals and corporations.
The plan would repeal the break for carried interest, which allows private equity fund managers to pay lower taxes on their earnings than they would for regular income. The loophole allowed for part of an investment manager’s income to be taxed as a capital gain — a 23.8% levy — rather than regular income.