Build Back Better Would Damage the Economy | Eastern North Carolina Now

    Publisher's Note: This post appears here courtesy of the John Locke Foundation. The author of this post is Paige Terryberry.

    House Democrats passed the centerpiece to Biden's agenda last week with only one Democrat dissenter. The "Build Back Better" bill supposedly shrunk over time from $3.5 trillion to $2 trillion, yet this is only due to "temporary" programs and misleading math. By scheduling some of the massive programs to expire, Democrats lowered the bill's price tag. They assume, however, that future legislators will renew the programs.

    What's In It?

    The largest spending chunk, $555 billion, goes to climate initiatives. Tax credits for utilities, electric vehicles, and manufacturers using clean energy are included, along with subsidies for the governments' purchase of new technologies.

    In health care, the bill would extend and expand Affordable Care Act subsidies, add hearing care to Medicare coverage, and expand Medicaid to the 12 non-expansion states, including North Carolina, between 2022 and 2025.

    The bill artificially raises wages for child care service providers. It subsidizes the cost of child care for families such that no family making less than 250% of their state's median income will pay more than 7% of that income on child care. Some families will pay nothing. The bill federally funds universal pre-K for three years (after the first three years, the federal government shares the financial burden with states) and spends $150 billion on at-home eldercare.

    Among other costly items, the bill addresses affordable housing, drug pricing, immigration, and IRS expansion.

    Who Pays for It?

    The bill is paid for by roughly $1.5 trillion in tax increases. According to Americans for Tax Reform, the bill results in the United States having the highest personal income tax rate in the developed world and the highest capital gains rate since the 1970s. Additionally, businesses will see higher corporate taxes and a new minimum corporate tax.

    While taxing the rich overall, the bill gives tax breaks to coastal elites by raising the state and local tax (SALT) deduction cap from $10,000 to $80,000. The Tax Policy Center found that almost a third of this benefit goes to the top 1%. The lone Democrat dissenter, Rep. Jared Golden (D-ME), cited the SALT provision as his reason for opposing the bill.

    How will individuals and businesses keep up with these new taxes?

    Perhaps one of the most outrageous elements of the bill is the expansion of the IRS, boosting the agency's budget by 70%. Democrats unwisely hope to use the IRS to squeeze more money from taxpayers than this expansion costs.

    The bill gives the wildly unpopular agency $88 billion for asset monitoring, investigations, and legal actions and dedicates only $2 billion of the funds to taxpayer services. The bill simultaneously burdens taxpayers with a complicated tax code and further funds one of the worst federal agencies to enact oversight.

    Conclusion

    Build Back Better taxes savings and investments to fund a wide variety of wasteful social programs. The bill will shrink and damage the economy. It is estimated to reduce long-run GDP by 0.4% and incomes by 0.4%.

    Democrats claim the programs they peddle are popular and that voters want to tax the rich, subsidize climate efforts, provide protections for illegal immigrants, and receive free child care. But voters understand that nothing from the government is free and can connect government spending to inflation. Government intervention has consequences, and Build Back Better would certainly be transformative if it becomes law, but just not in the way its supporters would have you believe.