Build Back Manchin

Schumer and Manchin secretly negotiated a shrunken version of Build Back Better that resurrects what amounts to a new Alternative Minimum Tax on corporations. Companies would pay the greater of the tax due under current law, or 15% of GAAP net income. In the first year it would cost about 2.5% of S&P 500 earnings, and then settle in at about 1% over a decade. This is a considerably smaller impact than the almost 10% tax cost of last year’s BBB. Positions as the Inflation Reduction Act of 2022, it fails to address inflation at all, and even the Democrats’ supporters in the media at calling it “the climate bill” instead. In our monetarist model, its small scale and long disbursement schedule would have no meaningful impact on money supply growth. The bill faces less internal Democratic opposition than BBB, but Sinema, who was not included in the negotiations and has opposed tax hikes in the past, is still an unknown.