A few days ago, the Tax Foundation dissected the inflation reduction act of 2022. Author William McBride summarized the results in a tweet thread (posted below as a pdf courtesy of Threadreaderapp.) Here’s the pull quote:
Bad advice is coming from certain economists who are perennially in favor of tax increases. There’s no consensus on whether “tax increases reduce #inflation” since it depends on several things, including how the tax revenue is spent.
In a forthcoming article I’ll discuss the basics of “how the tax revenue is spent.” For now, let’s just say that if the tax revenue is spent the tax increase cannot possibly reduce inflation. In fact, if all the revenue is spent it is likely to exacerbate the inflation problem.
Here’s the full thread. But I urge everyone to read the entire article.