Former U.S. Treasury secretaries back drugs, climate, tax bill

By David Lawder

WASHINGTON (Reuters) - Five former U.S. Treasury secretaries - four Democrats and one Republican -- on Wednesday voiced support for a proposed $430 billion drugs, energy and tax bill, saying that it would reduce costs for middle-class families.

The statement from former secretaries Robert Rubin, Larry Summers, Jacob Lew, Tim Geithner and Henry Paulson echo a letter https://home.treasury.gov/system/files/136/Inflation-Reduction-Act-Letter-to-Congress-20220802.pdf sent by current Treasury Secretary Janet Yellen to congressional leaders on Tuesday that the bill would not raise taxes for Americans earning less than $400,000.

The statement excluded Steven Mnuchin, the most recent former secretary, who served in former president Donald Trump's Republican administration. Paulson, the lone Republican in the group, has championed environmental causes, including transitioning to clean energy.

Republicans have argued that the bill would break President Biden's pledge not to raise taxes on that level because of a Joint Committee on Taxation analysis of distributional effects https://www.finance.senate.gov/imo/media/doc/jct_distributional_effects_inflation_reduction_act.pdf of income and taxes from the legislation, known as the "Inflation Reduction Act of 2022".

The JCT analysis shows that higher taxes paid by corporations would indirectly raise the effective tax burdens of Americans with incomes of $200,000 or less by $16.7 billion in 2023, through income reduction effects.

The former Treasury secretaries, in a statement issued by Summers' Harvard University office, said the bill was "financed by prudent tax policy that will collect more from top earners and large corporations.

"Taxes due or paid will not increase for any family making less than $400,000/year. And the extra taxes levied on corporations do not reflect increases in the corporate tax rate, but rather the reclaiming of revenue lost to tax avoidance and provisions benefiting the most affluent," they said.

The secretaries also said the JCT analysis selectively presented distributional effects of the bill, but neglected to show its benefits to middle-class families from reduced prescription drug prices to more affordable energy.

"This legislation will help increase American competitiveness, address our climate crisis, lower costs for families, and fight inflation — and should be passed immediately by Congress," the former secretaries said.

Summers last year was critical of the Biden administration's $1.9 trillion American Rescue Plan COVID-19 relief package, arguing that it was excessive and would stoke persistent inflation.

The proposed legislation would provide new federal funding for a significant reduction in U.S. carbon dioxide emissions that contribute to climate change and allow Medicare, the federal health insurance program for the elderly and disabled, to negotiate lower pharmaceutical prices.

The bill would be financed by a new 15% domestic corporate minimum tax large firms with more than $1 billion in book income, while closing some credits and deductions benefiting wealthy Americans.