The Democrats’ “Inflation Reduction Act” would reduce after-tax incomes for Americans in every income bracket and will worsen inflation, according to a new report from the nonpartisan Tax Foundation.
The Tax Foundation revealed that the bill would cause after-tax incomes for Americans in every income group except the top 1% to fall by 0.2%, and those in the top 1% would see after-tax incomes cut by 0.3%.
According to the report, “the Inflation Reduction Act would reduce long-run economic output by about 0.2 percent and eliminate about 29,000 full-time equivalent jobs in the United States. It would also reduce average after-tax incomes for taxpayers across every income quintile over the long run.”
“By reducing long-run economic growth, this bill may actually worsen inflation by constraining the productive capacity of the economy,” the report added.
The $740 billion price tag of the Inflation Reduction Act would also lead to worse inflation. As explained in the report, by “increasing spending, the bill worsens inflation, especially in the first four years, as revenue raisers take time to ramp up and the deficit increases. We find that budget deficits would increase from 2023 to 2026, potentially worsening inflation.”
The report echoes findings from an analysis of the bill by the Congressional Budget Office (CBO) which said that the “Inflation Reduction Act” would have a “negligible effect on inflation” in 2022 and could cause inflation to be higher in 2023.
“In calendar year 2022, enacting the bill would have a negligible effect on inflation, in CBO’s assessment. In calendar year 2023, inflation would probably be between 0.1 percentage point lower and 0.1 percentage point higher under the bill than it would be under current law,” the CBO said.