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Tom Cotton misleads on how Inflation Reduction Act will impact size of IRS, taxes
If Your Time is short
The Inflation Reduction Act would allow the IRS to hire up to 87,000 IRS employees over 10 years, but the agency expects to lose 50,000 employees over five to six years.
The law directly levies tax increases only on very large corporations and high-earning money managers. Independent experts say that for most Americans, the indirect impact of those hikes will likely be offset by provisions such as tax credits.
- Cotton provided no evidence of a “slush fund.” Some conservatives have criticized $27 billion that is earmarked in the law for states and nonprofits to spend on projects to reduce greenhouse gases, particularly in low-income communities, as a slush fund, a subjective term that suggests lax rules.
Arkansas Republican U.S. Sen. Tom Cotton isn’t up for re-election this year. But he ran a campaign ad attacking Democratic legislation that addresses climate change, raises the corporate tax rate and allows Medicare to negotiate prices on some drugs.
The online ad claimed there’s more to the Inflation Reduction Act than Democrats say.
"Only Democrats would call a bill that doubles the size of the IRS, raises your taxes and spends billions on a green energy slush fund the ‘Inflation Reduction Act," said the caption for the photo ad, which ran on Facebook and Instagram from Aug. 3 to Aug. 15, the day before President Joe Biden signed the measure into law.
"Don’t let him raise your taxes and give the IRS more power," said text next to a photo that shows Biden appearing to scowl with his mouth open, as if in mid-yell.
Overall, the ad is misleading.
The IRS will certainly grow as a result of the funding, but it’s not proved that it will double in size. The tax increases are not on most Americans and, according to independent experts, the indirect effect on most Americans is likely to be offset by tax credits and other provisions.
Cotton’s campaign and his Senate office did not respond to our requests for information, so we don’t know what in the bill Cotton is describing as a "green energy slush fund."
Some critics of the Inflation Reduction Act have characterized a greenhouse gas reduction provision as a slush fund, a subjective term that suggests lax rules. Although there is flexibility in the provision, grants are to be awarded competitively to states and nonprofits and most of the money must go to low-income communities.
The Inflation Reduction Act would raise an estimated $737 billion in revenue and spend $437 billion over 10 years, according to a summary from Senate Democrats.
The law includes a clean energy package costing $369 billion over 10 years; that includes $260 billion in clean-energy tax credits to boost investment in solar, wind, hydropower and other renewable energy.
The law also establishes the right for Medicare to negotiate prices with drugmakers on some medications. And corporations that have profits exceeding $1 billion for three consecutive years will face a new minimum 15% tax on corporate "book income," generally, the amount companies report to investors.
No Republican supported the measure.
Here’s what Cotton’s ad gets right and wrong.
This is unproved.
The IRS has about 80,000 employees. The agency expects to lose about 50,000 workers over the next five or six years, largely from retirements.
A May 2021 Treasury Department report said $80 billion would be enough to fund 87,000 full-time positions over 10 years. The report did not say all the hiring would be for auditor or other tax enforcement positions; it could also include "modernizing antiquated information technology."
The Inflation Reduction Act will provide the IRS nearly $80 billion over the next decade. But the Treasury Department said it will be several months before it decides how to spend the money from the new law.
This needs clarification.
The Inflation Reduction Act directly levies tax increases only on very large corporations and high-earning money managers. For example, companies reporting at least $1 billion in profits would have to pay at least 15% in such taxes.
This means that any impact on ordinary Americans would come from secondary effects — corporations tend to pass the cost of these tax increases to regular people through, for example, lower wages for workers.
An analysis by the congressional Joint Committee on Taxation found that every income group would lose about 1% in income from the secondary impact of tax changes in 2023 — and smaller amounts over the next nine years.
However, the analysis did not factor in the ways the law’s other provisions would help Americans financially. Those include subsidies for health insurance under the Affordable Care Act and tax credits for people who buy electric vehicles.
Independent experts expect these benefits to cancel out, or reverse, the bill’s impacts on ordinary taxpayers.
"Slush fund" is a subjective and loaded term suggesting a secretive stash of money, or funds available for almost any purpose, with little or no oversight.
We didn’t find evidence of that in the legislation; there are rules governing how and where grants are awarded.
Because the bill passed through what is known as the reconciliation process, the amount of oversight that can be applied is limited. (Reconciliation overrides the filibuster rules in the Senate, allowing a bill to pass with a simple majority rather than a 60-vote supermajority.)
Matt Weidinger, a fellow at the American Enterprise Institute, a conservative think tank, used the term "slush funds" in an opinion column about the legislation. He told PolitiFact he was referring to $27 billion that the Senate Environment and Public Works Committee said is for a "greenhouse gas reduction fund." (Weidinger said that Rep. Jason Smith, R-Mo., the House Budget Committee’s ranking member, referred to this money as a slush fund.)
The $27 billion would be for states, nonprofits and other entities to use on projects to reduce greenhouse gases, with 60% of the money earmarked for low-income communities, according to the Senate Environment and Public Works Committee.
Weidinger also cited another $5 billion in competitive grants for plans to reduce emissions and implementation grants, and $3 billion for environmental and climate justice block grants. That money "would flow broadly to states, tribes and municipalities for a variety of purposes," according to the Senate Environment and Public Works Committee.
Allowing the block grants to be used flexibly meets the "common description" of slush funds, Weidinger said. But block grants have been widely used by both Democratic and Republican administrations to provide fiscal flexibility in addressing problems.
And there are provisions that counter the slush fund argument.
Steve Ellis, president of Taxpayers for Common Sense, a nonpartisan group that tracks the federal budget, said that because the law was adopted through budget reconciliation, "lawmakers can’t delve too far into prescriptive policy or structure on the funded programs." That’s because the "Byrd rule" essentially limits reconciliation to spending, revenue or debt limit, Ellis said.
But Ellis said the $27 billion greenhouse gas reduction fund specifies that recipients be governments or nonprofits, sets aside funds for low-income communities and stipulates that funds must be competitively awarded.
The Environmental Protection Agency will devise guidelines for implementing the program, he said. "That is why it is incumbent on Congress to do its job and conduct oversight of the implementation of these programs, particularly those created through reconciliation."
He added: "I think calling it a slush fund goes too far unless Congress abdicates its responsibility."
Cotton said the Inflation Reduction Act "doubles the size of the IRS, raises your taxes and spends billions on a green energy slush fund."
It is not proved that the IRS will double in size. The agency will get funding to hire as many as 87,000 employees over 10 years, but expects to lose 50,000 employees in the next five or six years. And the agency has not finalized how it will allocate the funds.
The new law levies direct tax increases only on very large corporations and high-earning money managers. Independent experts expect that indirect effects of those hikes on most Americans will be offset by other provisions in the law, such as tax credits.
Cotton did not provide evidence of a "slush fund." Other critics of the law have pointed to $27 billion for states and nonprofits to use on projects that reduce greenhouse gases as a "slush fund." There is flexibility in how that money should be spent, but there are also rules. For example, grants must be awarded competitively and most of the money must go to low-income communities.
Cotton’s statement contains an element of truth but ignores critical facts that would give a different impression. We rate it Mostly False.
RELATED: Kevin McCarthy’s mostly false claim about an army of 87,000 IRS agents
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RELATED: GOP claim on tax hikes in Democratic bill doesn’t factor in subsidies, savings
RELATED: The Democrats’ overstated claim that the Inflation Reduction Act curbs debt, inflation
Meta, Tom Cotton campaign ad on Facebook and Instagram, ran Aug. 3 to Aug. 15, 2022
Associated Press, "AP Fact Check: GOP skews budget bill’s impact on IRS, taxes," Aug. 10, 2022
Email, Taxpayers for Common Sense president Steve Ellis, Aug. 19, 2022
PolitiFact, "Kevin McCarthy’s mostly false claim about an army of 87,000 IRS agents," Aug. 11, 2022
PolitiFact, "GOP claim on tax hikes in Democratic bill doesn’t factor in subsidies, savings," Aug. 3, 2022
PolitiFact, "Rick Scott overstates potential hiring surge at the IRS," Aug. 17, 2022
FactCheck.org, "Scott Overstates Tax Increases in Inflation Reduction Act," Aug. 11, 2022
FactCheck.org, "How Does the Inflation Reduction Act Address Climate Change?", posted Aug. 4, 2022, updated Aug. 10, 2022
AFP Fact Check, "Misleading claims circulate on tax burden of Inflation Reduction Act," Aug. 9, 2022
Sen. John Thune, "Thune: Democrats Prioritize Radical Climate Agenda Over Addressing Skyrocketing Energy Prices," Aug. 4, 2022
Senate Democrats, "Summary: The Inflation Reduction Act Of 2022," Aug. 11, 2022
Congressional Progressive Caucus Center, "Analysis of Climate and Energy Provisions in the ‘Inflation Reduction Act of 2022,’’ Aug. 2, 2022
Email, American Enterprise Institute senior fellow Matt Weidinger, Aug. 15, 2022
American Enterprise Institute, "The ‘Transformational’ Inflation Reduction Act Is Really Just More Green Stimulus," Aug. 8, 2022
Rep. Bob Good, "Congressman Good Opposes the Inflation Reduction Act," Aug. 12, 2022
CNS News, "Rep. Jason Smith: Inflation Reduction Act Includes ‘$27 Billion for a Climate Slush Fund for the EPA’ – 3 Times Its Annual Funding," Aug. 15, 2022
Rep. Bill Johnson, "Bill Johnson on the Inflation ‘Reduction’ Act," Aug. 12, 2022
Rep. Jason Smith, "As Americans Suffer in Biden’s Inflation Recession, Democrats Prioritize Hundreds of Billion for Green New Deal," Aug. 8, 2022
Senate Environment and Public Works Committee, "Climate and Equity Investments in the Jurisdiction of the Environment and Public Works Committee (EPW) in the Inflation Reduction Act," accessed Aug. 15, 2022
Wall Street Journal, "Inflation Reduction Act’s $27 Billion in Green Funds Could Spur Private Investment," Aug. 9, 2022
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Tom Cotton misleads on how Inflation Reduction Act will impact size of IRS, taxes
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