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GOP group exaggerates effect of Inflation Reduction Act
If Your Time is short
- The ad references the Inflation Reduction Act, which does not change the federal tax rate for low-income households.
- The group cited an analysis predicting the bill would indirectly cost those households up to 0.5% of their income.
- That analysis, though, didn’t examine other benefits offered in the bill. And other experts say the overall effects on low-income earners could be negligible.
A new ad accuses Democratic U.S. Senate candidate Cheri Beasley of wanting to bail out the rich and tax lower- to middle-income families.
Beasley, a former North Carolina Supreme Court chief justice, faces Republican U.S. Rep. Ted Budd in North Carolina’s race to replace retiring Republican Sen. Richard Burr. The contest is expected to be among the nation’s closest Senate races.
In the television ad commissioned by the Senate Leadership Fund, a Republican-backed political action committee, a narrator says:
"It's a question of fairness. Should a waitress be forced to help pay for a doctor’s student loans? Cheri Beasley thinks so. She backs student loan bailouts for the rich — even couples earning a quarter million dollars a year. Who pays? The rest of us. Beasley backs tax hikes — even on families making under $75,000. Cheri Beasley bails out the wealthy and taxes the rest of us."
The ad appears to reference President Joe Biden’s student loan debt forgiveness plan, albeit through some misleading statements. Under Biden’s plan, which is being challenged in court, some borrowers who earn well above the median household income in America could qualify for Biden’s student loan debt relief. But, as PolitiFact previously reported, the vast majority of the relief is concentrated on borrowers with lower incomes.
But did Beasley really express support for raising taxes on families making less than $75,000 a year?
No. The narrator’s transition from student loan bailouts to tax hikes might make it seem like Biden’s debt relief plan is funded by tax increases. That’s not the case. Small on-screen citations signal the advertiser has shifted topics from Biden’s student bailout plan to Beasley’s support for the Inflation Reduction Act.
The Inflation Reduction Act, though, does not change federal income tax rates for people earning less than $75,000 a year. The legislation may indirectly affect lower-income taxpayers to the tune of less than 1% of their after-tax income — but not through direct taxes. And expert predictions vary on when or how that would happen.
Beasley opposes raising taxes on anyone earning $75,000 or less per year, her campaign said when asked about the ad. Her campaign said the claim had already been debunked, pointing to news articles and fact checks showing that claims about tax hikes in the Inflation Reduction Act have been exaggerated. The campaign highlighted an Associated Press analysis that said: "Nothing in the bill raises taxes on people earning less than $400,000. … There are no individual tax rate increases for anyone in the bill."
Beasley has expressed support for the Inflation Reduction Act, tweeting on Aug. 7 that it would help lower costs and that votes against the legislation were "inexcusable."
To back up the claim about tax hikes in the Inflation Reduction Act, the Senate Leadership Fund pointed to an analysis by the congressional Joint Committee on Taxation. Republican lawmakers have also cited the analysis when making similar statements about the bill. However, the committee’s analysis offers an incomplete picture of the bill’s effects.
The bill, which Biden signed into law in August, only directly levies tax increases on very large corporations and high-earning money managers. Any impact on middle-income taxpayers would be indirect and hard to calculate. Corporations tend to pass along the cost of tax increases through lower returns for investors or lower wages for workers.
The bill could cost taxpayers about 1% of their annual income, the committee’s analysis found.
Households making $75,000 or less would lose 0.5% of their gross income as a result of increased corporate taxes passed on to consumers, or about $350 for someone earning $75,000, the committee found.
However, as PolitiFact has previously reported, the committee’s analysis didn’t examine how the bill would help taxpayers in other ways.
The Committee for a Responsible Federal Budget, a nonprofit organization that favors deficit reduction and has been skeptical of some of Biden’s spending plans, reported that healthcare subsidies offered for Affordable Care Act plans "alone would be more than enough to counter net tax increases below $400,000 in the (Joint Committee on Taxation) study." The group estimated that, by 2027, the Inflation Reduction Act would provide a net tax cut once fully phased-in.
Several groups weighed-in on the bill’s indirect effect on taxpayers, at varying depths and with varying results.
The Tax Foundation also believes the ACA subsidies will offset small tax burden increases for low-income households in the short term. However, when the ACA subsidies expire mid-decade, after-tax incomes would go back down.
"After-tax incomes are up by 0.3% on average in 2023 and 0.2% in 2032, and in the long-run they fall by 0.2% after taking into account the economic impacts," said Garrett Watson, senior policy analyst and modeling manager at the foundation.
The University of Pennsylvania’s Penn Wharton Budget Model predicted a 0.1% drop in after-tax income for low-income earners.
Experts at the Urban Institute-Brookings Institution Tax Policy Center identified the ACA subsidies as an "important factor" when considering the bill’s overall effect on taxpayers.
Five former Treasury secretaries signed a statement supporting the bill and rejecting the argument that its provisions represent a tax increase, writing: "Taxes due or paid will not increase for any family making less than $400,000 a year."
The ad says Cheri Beasley "backs tax hikes — even for families making under $75,000" and referenced the Inflation Reduction Act.
Beasley does support the Inflation Reduction Act but the claim is wrong to suggest it includes a change in tax rates for that income bracket. Expert analyses show that any effect on those earners would be on the scale of $350 and, by one estimate, delayed for several years.
The claim has a kernel of truth but ignores critical facts that would give a different impression.
We rate it Mostly False.
Video ad by the Senate Leadership Fund, "Wealth," posted to YouTube on Oct. 11, 2022.
Email exchange with Jack Pandol, spokesperson for the Senate Leadership Fund.
Email exchange with Dory MacMillan, spokesperson for the Cheri Beasley campaign.
Email exchange with Garrett Watson, senior policy analyst and modeling manager at the Tax Foundation.
Tweets by Cheri Beasley on Aug. 7, 2022.
Joint Committee on Taxation analysis of Inflation Reduction Act, updated Aug. 10, 2022.
Committee for a Responsible Federal Budget memo published Aug. 2, 2022
Tax Foundation analysis updated Aug. 12, 2022.
Urban Institute-Brookings Institution Tax Policy Center, "Putting JCT’s Score of the Inflation Reduction Act Into Context," published Aug. 2, 2022.
Penn Wharton Budget Model, "Senate-passed Inflation Reduction Act: Estimates of budgetary and macroeconomic effects," published Aug. 12, 2022.
Business Insider, "Five former treasury secretaries — including one of George W. Bush's — throw their support behind Manchin's inflation-fighting bill," Aug. 3, 2022.
Associated Press, "GOP skews budget bill’s impact on IRS, taxes," posted Aug. 10, 2022.
Bloomberg, "US tax bill costs corporations nearly $300 billion more, while middle class pays less," posted Aug. 9, 2022.
New York Magazine, "Republicans Say Biden’s Plan Taxes the Middle Class. That’s False." posted Aug. 1, 2022.
PolitiFact, "Most relief from Biden’s student loan forgiveness plan flows to lower-income borrowers, not higher," posted Aug. 31, 2022; "Fact-checking statistics about Biden's student loan forgiveness plan," posted Aug. 26, 2022; "Tom Cotton misleads on how Inflation Reduction Act will impact size of IRS, taxes," posted Aug. 23, 2022; "GOP claim on tax hikes in Democratic bill doesn’t factor in subsidies, savings," posted Aug. 3, 2022.
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GOP group exaggerates effect of Inflation Reduction Act
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