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The Inflation Reduction Act of 2022, a landmark piece of legislation passed this summer, has broad implications across multiple sectors of the economy. The policy package is less robust than the Build Back Better bill President Joe Biden tried to push through Congress last year but it's still ambitious in its targeting of prescription drug prices and carbon emissions.
The White House and Democrats in Congress have touted the act for its reforms to the tax system, historic investments in clean energy, and reductions in health care prices.
Here's what you need to know about the bill, who voted for it, and how it might affect your pocket book.
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What is the Inflation Reduction Act of 2022?
The Inflation Reduction Act is a large legislative package passed by Congress and signed into law by Biden aimed at fighting inflation, lowering the deficit, reducing the price of prescription drugs for seniors, and lowering the country's carbon emissions.
Did the Inflation Reduction Act pass?
Yes. The Inflation Reduction Act passed Congress, and was signed into law by President Biden on Aug. 16, 2022.
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What is in the Inflation Reduction Act of 2022?
The Inflation Reduction Act includes broad swaths of legislation targeting different sectors of the economy. Among its most prominent provisions are:
An expansion of Medicare benefits to include free vaccines, insulin prices capped at $35 a month, and a ceiling for prescription drug prices at $4,000 in 2024 and $2,000 in 2026
Cuts in the cost of home energy
Clean energy and tax breaks targeted to reduce carbon emissions 40% by 2030
A new 15% minimum corporate tax and a 1% fee on stock buybacks
Expanded IRS tax assistance and enforcement to cost $80 billion over the next 10 years
Extension of the Affordable Care Act's federal subsidies to 2025. These subsidies lower the cost of premiums for enrollees.
The Inflation Reduction Act by the numbers
Figures produced by the Congressional Budget Office and the Joint Committee on Taxation estimate investments, and revenue raised.
$369 billion in Energy Security and Climate Change
$64 billion in Affordable Care Act Extension
$288 billion through Prescription Drug Pricing Reform
$124 billion IRS Tax Enforcement
$14 billion efforts to close the Carried Interest Tax loophole
$313 billion establishment of a 15% Corporate Minimum Tax
Who wrote the Inflation Reduction Act?
The legislation is the culmination of efforts by both the Biden administration and its allies on Capitol Hill who have long pushed for lower drug prices, a more progressive tax code, and efforts to combat the worsening climate crisis.
The final compromise was struck in July by was Senator Majority Leader Chuck Schumer, D-N.Y., and Sen. Joe Manchin, D-W.Va, following negotiations that seemed at a standstill for weeks. They agreed upon and introduced the final version of the Inflation Reduction Act of 2022. Manchin, the Senate's most moderate Democrat, had held out his vote for previous versions citing concerns over increased government spending and climate provisions.
What's in the Inflation Reduction Act for home energy?
One of the ways in which the bill aims to fight climate change is with home energy rebates and tax credits, making it more affordable to access clean energy.
For example, homeowners who invest in an energy-efficient heat pump water heater will be eligible for a rebate as high as $1,750. Those purchasing an upgraded breaker box, which assists in preparation for an all-electric home, can be eligible for a rebate value of up to $4,000. Another program offers rebates up to $840 for the purchase of an electric stove, cooktop, range or oven.
Additional home energy improvements eligible to receive rebates through the law include: insulation improvement, purchase of an electric heat pump dryer to do your laundry, and installation of an electric heat pump for a home's cooling and heating needs.
What is in the Inflation Reduction Act for solar?
The Inflation Reduction Act offers a a 30% tax credit for families who install solar panels on their home roofs. Given the average cost of installing a rooftop solar-powered system is about $19,000, that amounts to $5,700 in savings, according to the Environmental Defense Fund.
The provision is meant as an incentive to divest from fossil fuels and bring the U.S. closer to its carbon emission reduction goals.
How does the Inflation Reduction Act affect taxes?
The Inflation Reduction Act is designed to adhere to Biden's campaign promise not to raise taxes on families or small businesses that make less than $400,000 a year, though GOP critics say it will have an indirect effect through tax increases to corporations.
However, there is a new corporate tax. Large corporations earning over $1 billion a year will have to pay a minimum 15% tax. It is aimed in part at closing loopholes that allow hundreds of companies to skirt payment of the the standard 21% corporate tax.
The new tax is expected to raise some $313 billion over the next ten years. Since the bill is projected to raise more in taxes than it spends, it is expected to reduce the federal deficit.
The bill also allocates billions of dollars to the IRS over the course of the next ten years much of it to hire some 80,000 workers: a combination of agents, auditors and taxpayer support staff.
Does the Inflation Reduction Act cap insulin prices?
Yes, for Medicare recipients. Enrollees in Medicare, the federal health insurance program for those 65 years of older, will be protected by a $35 cap on their monthly insulin supply beginning next year.
This is not a broad federal cap since it applies only to those on Medicare, but the bill does aim to reduce the cost of prescription drugs through other provisions.
Who voted for the Inflation Reduction Act of 2022?
The Inflation Reduction Act passed the Senate 51-50 on Aug. 7, 2022 with all 50 Democratic senators voting in favor and Vice President Kamala Harris stepping in to cast the tie-breaking vote in her dual role as Senate president. No Republican senators supported passage of the policy package.
Similarly in the House of Representatives, all Democratic representatives voted in favor and all members of the opposing party voted against, with the final count at 220-207.
This article originally appeared on USA TODAY: What is Inflation Reduction Act 2022? Here's what to know about bill.