Prescription drugs, taxes, climate change: What the Inflation Reduction Act will mean for you
WASHINGTON – A Democratic plan to combat climate change and lower prescription-drug costs is a scaled back version of the multitrillion dollar domestic-policy package President Joe Biden hoped to pass last year.
But while smaller, it still stands out in several ways.
Here’s how the Inflation Reduction Act could make notable changes on energy use, health-care costs, the federal deficit and taxes.
Congressional action: The Senate passed the legislation Aug. 7 on a 51-50 party-line vote, with Vice President Kamala Harris casting the tiebreaker. The bill passed the House by a 220-207 vote, with every Democrat voting for the bill.
GOP response: No Senate Republicans voted for the legislation. No Republicans in the House voted for the bill.
White House response: Biden praised the bill as a “godsend” for many families, saying it would lower health-care costs for millions of Americans and restore fairness to the tax code.
Next step:Biden signs climate and health care bill. Now, Democrats race to explain its benefits
What’s in the bill?
- Climate change: The bill invests about $370 billion into a range of policies aimed at reducing U.S. greenhouse-gas emissions, making it the most substantial effort by the federal government to tackle climate change in history. Tens of billions of dollars will go toward supporting renewable energy development, lowering the costs of electric vehicles, building out public charging stations, weatherizing homes, plugging leaks of greenhouse gases from pipelines and wells, lowering emissions from the agricultural sector, and supporting communities near polluting industries.
- Prescription-drug costs: The bill is the most significant prescription-drug legislation to pass in 20 years – and a rare loss for the deep-pocketed pharmaceutical industry. Decades after then-President Bill Clinton proposed the government negotiate with drug companies for lower prices, Medicare will have to do that for some high-cost drugs. Experts at the Kaiser Family Foundation, a nonpartisan health research organization, said the bill's provisions ensure immediate and long-term impact. Drug companies also have to pay rebates to Medicare if their prices rise faster than inflation. Diabetic seniors won't have to pay more than $35 a month for insulin. Starting in 2026, out-of-pocket costs for all prescription drugs will be capped at $2,000 a year for Medicare recipients.
- Insurance premiums:Extra subsidies included in the 2021 coronavirus relief package for people who purchase insurance on their own, rather than getting it through an employer or a government program like Medicare and Medicaid, would be extended for three years.
- Deficit reduction: Because the bill raises more revenue through higher taxes than it spends, it’s projected to reduce the federal budget deficit by close to $300 billion over the next 10 years. That would make it the largest deficit-reduction bill since the Budget Control Act of 2011, according to the Committee for a Responsible Federal Budget, a nonpartisan budget watchdog group. Sen. Joe Manchin, D-W.Va., who scuttled an earlier, more expensive, version of the package because of concerns about soaring prices, had insisted on deficit reduction to help control spending and rein in inflation.
- IRS enforcement: The bill’s $80 billion bump for the IRS would mean a substantial boost in tax enforcement funding for an agency more used to being targeted with budget cuts in recent years. The IRS’s overall budget has shrunk by more than 18% since 2010, when adjusted for inflation. Its enforcement budget has fallen by 15% over the same period, resulting in a sharp decline in the agency’s workforce.
- Taxes: The bill sticks with Biden's pledge not to raise taxes on families or small companies that make less than $400,000 a year. Large corporations that earn more than $1 billion a year would have to pay a new minimum 15% tax. The new tax would close loopholes that enable 200 U.S. companies to avoid paying the standard 21% corporate tax rate, including some that pay no taxes at all. The new tax would kick in after the 2022 tax year and raise some $313 billion over the decade.
Opinion:Do our elected leaders know how it feels to choose between food and medicine? I do.
What’s not in the bill?
Several of Democrats’ most ambitious plans packed into earlier proposals were left behind. The final version does not include paid sick and parental leave, universal preschool, subsidized child care and an enhanced child tax credit. Some tax, climate and health-care policies were also pared back. For example, there’s no health insurance help for people in poverty in the 12 states that have not expanded Medicaid under the Affordable Care Act. The provisions to control drug prices for Medicare patients don’t extend to private insurance. On taxes, Democrats dropped most of Biden’s proposed tax increases on high-income households and eliminated a proposed “carried interest” tax increase on private equity earnings.
What they are saying
- "This is the best development on health care for the American people in years," said Sara Lonardo, a spokesperson for the progressive group Families USA. "It promises lower drug costs and wider health-care access.
- “Requiring drug companies to pay rebates if they increase prices faster than inflation in both Medicare and private insurance would be a precedent-setting federal role in health care cost containment,” tweeted Larry Levitt, the Kaiser Family Foundation’s executive vice president for health policy. “You either like that or you hate it, depending on your perspective.”
- “The bill is designed to make it easy to be green," said Lowell Ungar, federal policy director for the American Council for an Energy-Efficient Economy in Washington.
- “This isn’t an ‘Inflation Reduction Act.’ Not even close," said Sen. Minority Leader Mitch McConnell, R-Ky. "It’s just a catalog of tax hikes and green boondoggles that Democrats have wanted for years, with a false new label slapped on the front."
- "They've got a big corporate tax increase that's going to probably make this recession that we're in worse," said Sen. Pat Toomey, R-Pa. "All of this spending is unnecessary. It's going to exacerbate inflation. It is not going to reduce the deficit."
- “This proposal is nothing more than a repackaging of the same bad ideas with a new name slapped on it," said Jay Timmons, president and chief executive officer of the National Association of Manufacturers.
Want to know more? Here's what you missed
A REVOLUTION OF WHAT POWERS DAILY DOMESTIC LIFE:Cash incentives in climate bill could revolutionize US homes, 1 HVAC at a time
INFLATION'S PROGRESSION:How inflation's wrath, recession fears are (quickly) creeping into middle-class America
ONE HOME AT A TIME:Green energy is great for fighting climate change. Not using it is even better.