The Inflation Reduction Act would invest $369 billion in energy security and climate-change programs over the next 10 years, among other proposed changes. Do the provisions translate to investment opportunities? Energy researchers weighed in.
If investors thought they were finding their footing in a volatile stock market, a new tax, climate and healthcare spending bill from Capitol Hill might have them trying again to maintain their stability.
If the bill becomes law — the legislation is expected to be passed by the House this week — investors may quickly spot some related outcomes. Look at the pop for solar power companies, electric vehicle makers and fuel cell companies on Monday, a day after Senate Democrats eked the bill through on a 51-50 vote.
The S&P 500 SPX, +2.13%, the Dow Jones Industrial Average DJIA, +1.63% and the Nasdaq Composite COMP, +2.89% were all up Wednesday on the back of July’s Consumer Price Index, which was lower than the previous month. “Imposing a small 1% buyback tax is a reasonable way to offset some of the tax advantage,” compared to dividend payouts, said Thornton Matheson, senior fellow at the Tax Policy Center. Still, Matheson noted, “it’s really the shareholder who will bear the burden.”
Understanding the Inflation Reduction Act’s 15% corporate minimum tax On paper, the corporate income tax rate is 21%. But critics, including Biden, have long said companies use the tax code’s thicket of rules and write-offs to shrink their tax bill far below that. That’s one part of the trouble potentially laying ahead, said Will McBride, vice president of federal tax and economic policy, at the right-leaning Tax Foundation. The $1 billion threshold could give companies a strong incentive to tweak and adjust their reporting on costs and profits in order to avoid or minimize exposure to the tax.
The organization went on to say “public policy taxation goals should not have a role in influencing accounting standards or the resulting financial reporting.” Could the Inflation Reduction Act’s green energy focus grow an investment portfolio? On Monday, companies and ETFs within the clean energy sector jumped after Senate passage on a bill stuffed with many generous tax credits for homeowners and car buyers. Do the $369 billion in climate and energy provisions translate to investment opportunities?
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