OPINION: The Inflation Reduction Act would help bring down the cost of energy — one of the main drivers of inflation and make corporations pay their fair share of taxes, among other proposed changes. It is a very important step in the right direction.
NEW YORK—Senate Democrats’ compromise bill, the Inflation Reduction Act of 2022, addresses not just inflation but also several key longstanding problems facing our economy and society.
These investments will yield far-reaching returns. The costs of climate-driven events will reduce our standard of living even more than today’s inflation will, and they are disproportionately borne by lower-income households, people of color, and future generations. These costs are far larger and more difficult to rectify than the costs of deficits.
The United States is one of the world’s leading sources of pharmaceutical innovation, and much of the basic research behind these advances was paid for by American taxpayers. Yet, Americans pay much more for prescription drugs than people in other countries, partly because drug companies have been given an unbridled power to set prices. Many of us have been fighting for years to curb these firms’ undue market power. If the IRA becomes law, this provision alone would be a signal achievement.
A 15% US minimum corporate tax will not only raise badly needed revenue; it will also help stop this self-defeating global race. This is especially important for the U.S., because it spares American jobs from unfair competition. These predictable arguments against the IRA’s tax provisions are based on a flawed assumption: namely, that corporations will “shift” the burden of the minimum tax by raising prices and lowering wages. But economists have long recognized that the current U.S. corporation-tax regime—which allows firms to deduct virtually all costs, including labor and capital—is close to a pure profits tax.