Republicans aren’t raising taxes by eliminating special tax breaks for favored businesses in their debt limit proposal, contrary to The Wall Street Journal. (Commentary)
When is a tax increase not a tax increase? When proposed legislation cuts special tax credits and other tax breaks handed out by politicians who want to pick winners and losers—and please some wealthy donors.
Somebody needs to explain that to Wall Street Journal reporter Richard Rubin.
He recently ran a story about the House Republican budget proposal with the lede: “Republicans finally found a tax increase they can support.”
Republicans want to raise taxes? Say it ain’t so!
It ain’t so.
In the Inflation Reduction Act (IRA), which passed in August 2022, Democrats on a party-line vote vastly expanded tax credits and other tax breaks to various clean energy pet projects.
Here’s how Reuters correctly and non-pejoratively describes that provision in the Republican bill: “It would repeal incentives for renewable energy, electric vehicles and other climate-friendly technology that Democrats passed last year as part of the Inflation Reduction Act.”
And here is how Rubin describes it in the WSJ. “The changes would shrink breaks for wind energy, solar power, hydrogen and electric vehicles, effectively raising taxes on some manufacturers, car buyers and others.”
Democrats have picked up and are using that “Republicans want to raise your taxes” theme—because they know that cutting taxes is integral to the Republican brand. If Democrats can frame cutting special-interest, clean energy subsidies as a tax increase, they have a better chance of forcing Republicans to back off.
Rubin is “effectively” doing the Democrats’ work for them.
Let’s take an example. The IRA included a $7,500 consumer tax credit for electric vehicle (EV) purchases. But there are a number of strings attached. Individuals can’t make more than $150,000 a year ($225,000 for heads of households and $300,000 for joint filers). And the suggested retail price can’t be more than $80,000 for most trucks and SUVs, and $55,000 for all other vehicles.
So, under the Republican plan, a qualifying, likely high-income, individual buying a qualifying EV might not get the $7,500 tax credit. That would cost more money out of the purchaser’s pocket, but less money out of taxpayers’ pockets, because taxpayers are the ones funding the tax credit.
When a store’s special sale price expires, we don’t typically say the company jacked up the price. We say the sales price is no longer available.
The best tax policies apply to all people in a broad group. The Republicans’ 2017 tax reform legislation lowered the corporate income tax from 35 percent to 21 percent. And it applied the cut to all corporations, not politically favored ones.
Repealing special tax breaks to certain politically favored groups isn’t a tax increase. It’s ending political favoritism.
Originally published by Institute for Policy Innovation. Republished with permission.
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