What specific tax changes and deficit estimates are contained in the Inflation Reduction Act as scored by CBO and independent budget analysts?
Executive summary
The Inflation Reduction Act (IRA) bundled several tax-law changes — most notably a new 15% corporate book minimum tax, a 1% excise tax on corporate stock buybacks, and roughly $80 billion of additional IRS funding intended to raise compliance revenue — and was scored as deficit-reducing by some official and independent scorers but with materially different totals depending on assumptions about enforcement and program uptake (CBO, JCT, PWBM, Tax Foundation) [1] [2] [3] [4]. Over the 2022–2031 window, estimates range from a modest net deficit reduction to hundreds of billions of dollars of savings or, in later CBO updates, erosion of those projected savings as implementation and higher-than-expected spending play out [2] [5] [6] [7] [8].
1. What the law changes on taxes — the headline provisions
The IRA’s tax package created a 15 percent minimum tax on corporations’ financial-statement (“book”) income, imposed a 1 percent excise tax on stock buybacks, tightened some passthrough loss-deduction rules and included other business tax changes that JCT and CBO scored as increasing receipts, while also expanding or extending many refundable and nonrefundable tax credits tied to clean energy and electric vehicles that offset gross revenue gains [1] [5] [4]. The law also left in place major administrative changes relevant to revenue: roughly $80 billion in IRS funding intended for enforcement, hiring, and modernization that CBO and other modelers treated as an investment expected to yield additional collections over the decade [5] [2] [4].
2. CBO’s official scoring: baseline numbers, revisions, and caveats
CBO’s published score documents multiple estimates as the legislative text and administrative guidance evolved; one CBO publication summarized a net decrease in the deficit of about $90 billion for 2022–2031 taking into account its baseline assumptions and scored revenues, while later CBO figures — and consolidated reporting by budget analysts — showed different headline numbers as assumptions about IRS collections, drug-pricing savings, and energy tax-credit uptake changed [2] [1] [7]. CBO and the Joint Committee on Taxation also attributed substantial additional revenue to increased IRS funding (CBO’s estimate of roughly $180–204 billion of additional receipts tied to enforcement funding appears in multiple summaries), but CBO warned that some technical and implementation choices, and updated baselines, altered how much savings the law would ultimately deliver [5] [2] [7].
3. Independent modelers: close agreement on scale, important timing differences
Independent analysists largely corroborated the direction of CBO’s score while differing on magnitude and timing: the Penn Wharton Budget Model found effects almost identical to CBO’s aside from timing of corporate minimum-tax receipts, with PWBM’s cumulative deficit reduction estimates close to CBO’s depending on the window used [3]. Outside fiscal groups and think tanks produced a range of outcomes — the Committee for a Responsible Federal Budget and related summaries cited larger headline reductions (figures like roughly $238–305 billion cited in media summaries of the CBO/JCT framework), while Tax Foundation modeling that incorporated macroeconomic feedback produced a different net revenue picture and emphasized that energy and clean-tech credits add to near-term spending needs [6] [5] [4].
4. Why estimates diverge and what later CBO updates show
Differences in scores trace to methodological choices: whether to count projected IRS enforcement gains (and how much), assumptions about producers’ use of book-income reporting to avoid the minimum tax, uptake and certification of energy credits, and the timing and size of drug-pricing savings from Medicare negotiation; those assumptions create multi-hundred-billion-dollar swings in 10-year tallies [3] [4] [8]. Importantly, CBO’s later work and testimony signaled that some IRA provisions (notably energy tax credits and implementation of drug-price changes) have increased projected deficits relative to earlier CBO baselines, undercutting portions of the initially advertised deficit reduction even as other components (IRS enforcement, corporate taxes, buyback tax) continue to produce revenue in projections [7] [8].
5. Bottom line: concrete tax items and an uncertain fiscal net
The concrete tax and revenue items in the law are clear — a 15% corporate book minimum, a 1% buybacks excise, stricter passthrough loss rules, expanded clean-energy and EV credits, and significant IRS funding earmarked for enforcement — but the law’s net effect on deficits depends heavily on contested assumptions about enforcement yields, credit utilization, and Medicare drug-savings implementation; across reputable scorers the 2022–2031 window produces estimates ranging from modest net deficit reduction (CBO’s formal product in some iterations) to larger reductions in some independent summaries and, in later CBO updates, reductions that have been partly eroded by programmatic spending and updated baselines [1] [2] [3] [6] [7] [8].