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September 30, 2022 11:01 pm

National News

The Inflation Reduction Act’s Impact on Tax Reform

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Last week, Congress passed the Inflation Reduction Act (IRA) which creates new tax reforms primarily affecting corporations. The IRA will not add any new taxes for small businesses or families making less than $400,000/year. Instead the legislation creates a new 15% minimum tax for corporations making more than $1 billion in profit. This reform is estimated to bring in about $258 billion dollars within the next decade which will be put back into governmental programs. 

Senator Krysten Sinema (D-AZ) pushed back against other Democrats attempts to reduce the carried interest loophole which allows investment managers to identify their compensation as capital gains rather than income which significantly reduces their tax rate. To compromise, Sinema and other Democrats agreed upon a 1% excise tax on stock buybacks which will bring in about $14 billion in the next decade after it goes into effect in 2023. 

To help enforce these tax reforms and current workload, the Internal Revenue Service will get additional funding to help add more employees and management. This addition will increase tax revenue by $124 billion in the next 10 years.