The Senate is gearing up for votes on the Inflation Reduction Act, aka budget reconciliation. This is the pared down version of the Build Back Better Act that was negotiated by Sens. Schumer (D-NY) and Manchin (D-WV) behind closed doors.

Last week we wrote about the package and some particular provisions. Because it’s that big of a deal, we’re going to stick with reconciliation. In this Weekly Wastebasket we’ll review the revenue raising provisions in the package. For major pieces of legislation, the non-partisan Congressional Budget Office (CBO) is tasked with estimating the potential cost (or savings) of spending and policy provisions if the bill is enacted. When legislation is first revealed and moving through the process quickly, the budget “score” available is preliminary. To underscore this, earlier in the week the Joint Committee on Taxation (Congress’s nonpartisan scorekeeper on tax provisions) said its scores were “very preliminary” – that’s something we haven’t seen before. The Congressional Budget Office released its latest official score for the non-tax provisions, on Wednesday. While the final estimated price tag of the bill won’t be known until the Senate and House agree on truly final text, the bulk of the bill is coming into focus.

The big revenue raisers in the bill are the provisions that create a corporate minimum tax of 15 percent, treatment of carried interest (it’s…complicated, we’ll explain), Medicare drug pricing provisions, and investments in IRS operations and enforcement. There is a passel of other provisions that generate some revenue, like making permanent an increase in the black lung excise tax ($1.1 billion) and renewing Superfund taxes ($11.7 billion).

Including these various revenue raisers means that, despite having some significant spending provisions and tax expenditures (more than $430 billion worth of significant), the collective impact of this bill will actually reduce deficits according to the congressional scorekeepers. Of course, the devil’s in the details because a lot of that spending will be in the near term and the savings amassed over a decade. Still, after more than a decade of emergency spending packages, budget deals, and tax cuts that didn’t even try to reduce deficits, a bill score reducing the ten-year deficit by $101.5 billion is nothing to sneer at. At least we won’t.

So, let’s dig in on some of these provisions.

After some deductions and adjustments, the 15 percent corporate minimum tax rate is estimated to raise $313.1 billion in revenue over the next decade. You can be sure companies will get creative and try to find ways around the tax, but it will at least ensure companies are paying more of their fair share of taxes. While both are set at 15 percent, this minimum tax is calculated differently than the 15 percent global minimum tax that 136 countries have agreed to implement. But it certainly advances the ball in that direction.

Carried interest is a tactic hedge fund and private equity managers use to shield income by saying it is capital gains which are taxed at a much lower rate. In essence, these individuals assert the money they are being paid for their labor in making and managing investments is really investment income which is hogwash. Whereas investments are a financial risk (they could have a loss instead of a gain) these money managers are going to get paid, no matter what. Which means it is income (just like wages/salaries) and should be taxed as such. Closing this loophole nets $13.0 billion.

The prescription drug pricing reform is mostly the ability for the government to negotiate prices directly with the pharmaceutical manufacturers. There are several other elements such as limiting the price increases of drugs to overall inflation, the result of the major revenue raisers (or cost limiters in this case) is nearly $287 billion in new revenue.

There’s one last notable revenue raiser – which starts with increasing funding for the IRS. Over the next decade the legislation calls for the agency to receive $90 billion in funding above current levels. As we have noted before, the IRS has been notoriously underfunded for years. The National Taxpayer Advocate has pointed out its antiquated computer systems, aging and shrinking workforce, and diminished ability to conduct enforcement. Let’s face it – it’s not a popular agency. But taxpayers benefit from an adequately funded IRS. It means calls get answered, refunds come faster, and it is more transparent and accountable. In this case, you have to invest in the IRS to raise revenues in the future.

The reconciliation bill contains funding for operations and personnel, but the bulk ($45 billion) is for enforcement. The IRS has six months to tell lawmakers exactly how they are going to spend this money, but the key thing is it must be targeted at more complex investigations. Our country relies on voluntary tax compliance, and no one wants to feel like a sucker, that they’re the only one paying their fair share. So, the IRS should be going after abusive tax shelters, exotic schemes to get out of paying taxes and individuals who are shielding or misrepresenting income. For policy reasons, this provision doesn’t get a revenue score, but as the CBO points out the provisions that “increase funding for tax enforcement activities also would increase revenues.” An earlier estimate of similar provisions by CBO indicated $200 billion in increased revenues.

Even pared back, this is a massive package. One of the problems with enacting policy through reconciliation is the limitations of the legislation. For instance, part of the reason lawmakers didn’t dictate what the IRS should do (other than not go after anyone with less than $400,000 in income) is that you can’t do that in reconciliation. For reconciliation provisions to receive a green light to be in a bill, they must be spending, revenue, or debt limit related – that’s it. So, it really is reading the tea leaves to see how the spending will be implemented over the next decade. But what we are happy about is the official scorekeepers see that if this bill is enacted there will be less debt in ten years’ time. You don’t hear that often enough.