Updated: Oct 27, 2022
Inflation has been a growing problem since the pandemic lockdowns ended. Driven by a shock in the supply of goods and services, caused by the lockdowns that happened worldwide, and an increase in the money supply due to government stimulus packages. This article will provide a brief overview of the act and some potential implications it may have on your business.
What is the Inflation Reduction Act?
The Inflation Reduction Act of 2022 is designed to help businesses and individuals cope with inflation by increasing taxes and an an increase in government spending. This is exactly why some economists believe that the act will actually make inflation worse. The act would raise the marginal tax rate on income, capital gains, and dividends to 40 percent. It would also raise the corporate tax rate from 21 percent to 28 percent. The act would also create a new, higher tax bracket for those making more than $1 million per year. Finally, the act would increase government spending by $1.5 trillion.
87 Thousand IRS Agents?
Taxes are never fun, but it seems like the government is about to make them even more of a headache. The inflation Reduction Act of 2022 includes a plan to increase the hiring of IRS agents by 87,000 personnel. That's a lot of extra audits! While it's always important to stay on top of your taxes, this news is sure to put a lot of people on edge. The increased scrutiny that businesses and business owners will face will be significant, and the compliance burden will be great.
Will Taxes go up?
The Inflation Reduction Act of 2022 will also reduce business deductions and tax credits such as depreciation, research and development and other tax credits. This would have a direct impact on profits and could make it difficult for businesses to expand or even stay afloat. The deduction reduction is just one part of the proposed changes to the tax code, and it's sure to be a controversial one.
What is it For?
Another part of the bill is the plan to increase government spending by $1.5 trillion. This would be paid for by increasing taxes on businesses and the wealthy. The increased spending would go towards infrastructure, education, and other areas that would help boost the economy. However, some economists believe that this could actually lead to more inflation. After all, pumping new spending into the economy during the pandemic is what got us here in the first place.
The Inflation Reduction Act of 2022 could have a number of implications for businesses and individuals. First, the act would increase taxes on businesses and high-income earners. This could lead to less investment and slower economic growth. Additionally, the act would increase government spending. This could lead to higher interest rates and inflation. Finally, the act could have a negative impact on the stock market.
When Will it Start?
On Aug 12, 2022, Congress has passed the Inflation Reduction Act of 2022, and it is now on the desk of the President to be passed into law. In the meantime, businesses must continue to adapt to the ever-changing economic landscape. If your business needs guidance and financial planning support during these unpredictable times, we're here to help!
Please contact us if you have any questions about how the Inflation Reduction Act of 2022 could impact your business. We can help you navigate the ever-changing economic landscape and ensure that your business is on solid footing. Request a free consultation today!