Minnesota’s Economic News — W/E 12/8/23
State and local taxes and spending Duluth News Tribune: Councilor’s View: Land-value tax could mean fairer taxation for Duluth Park Rapids Enterprise: Park Rapids cuts levy from 33% increase to…
The proposed Inflation Reduction Act won’t reduce inflation but will increase taxes.
A report from economists at Moody’s Analytics said the opposite – or at least it appeared to. Business Insider reports:
The Inflation Reduction Act will do what it says on the tin, according to economists at Moody’s Analytics.
If passed, the plan “will nudge the economy and inflation in the right direction,” economists led by Mark Zandi said in a Monday research note.
But if you read on the picture is less rosy:
The overall impact on price growth will be limited, however. Moody’s expects the IRA to only lower the Consumer Price Index — a popular gauge of overall inflation — by 0.33% by the fourth quarter of 2031, according to the note.
The impact will be “marginal” through the middle of the 2020s but become more “meaningful” later in the decade, the team added.
To put that “meaningful” 0.33% decline in the CPI by 2031 in context, it increased by 1.0% in May alone.
To put it bluntly, Moody’s analysis is garbage. It claims as Business Insider puts it:
That taxes on corporations will slow growth, in turn cooling the economic activity that’s helped push price growth to 40-year highs.
It is true that taxes on corporations will slow growth, but that is the last thing we want. Our inflation problem stems from a much more rapid increase in the amount of money there is to spend than in the amount of goods and services there are to spend it on. So, on the one hand, we want to slow – or stop – this increase in the amount of money. On the other, we need to increase the amount of goods and services there are to buy. Reducing that quantity, as Moody’s admits the IRAs corporate tax hike would do, will worsen inflation.
This bill is an insult. Simply calling this ragbag of spending proposals the Inflation Reduction Act won’t make it one any more than I will make myself irresistible to women by just calling myself Brad Pitt.
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The legislature appropriates more money, the unions grab it for salaries, the school board cuts middle school band, and everyone blames the legislature for underfunding. Rinse and repeat.