Politics Here’s what’s in the Inflation Reduction Act, the sweeping bill impacting health, climate and taxes
Inflation could cost Biden and the Democrats greatly
There is a reason President Joe Biden has gone from describing inflation as “transitory” to listing it as his “top domestic priority.” The last time inflation, now running at a 41-year high, was this bad, rising consumer prices helped make the Democrat in the White House a one-term president. Republicans won the next three presidential elections. Biden would like to avoid this fate. It may be too late for the narrow Democratic congressional majorities, especially in the House. Already disfavored due to recent history and redistricting, inflation appears to be the issue most likely to fuel a red wave in November.
The House on Friday afternoon is expected to approve the Inflation Reduction Act, sending a top Democratic legislative priority to the White House in a significant victory for President Biden.
The includes measures to address energy and climate as well as major changes to the tax code and to health care.
Here’s a look at what is included in the bill:
ENVIRONMENT, ENERGY AND CLIMATE
The bill contains a host of measures that would impact energy, the environment and climate change.
It has many provisions that promote the deployment of clean energy or that are otherwise designed to mitigate climate change, but also contains others that boost fossil fuels — included to secure the support of Sen. Joe Manchin (D-W.Va.).
House to pass Biden's $370 Inflation Reduction Act TODAY
The House of Representatives is expected to pass President Joe Biden's sweeping $370 billion Inflation Reduction Act Friday. The legislation - which passed the Senate with only Democratic votes on Sunday - aims to reduce the price of prescription drugs and health insurance and includes a number of green energy initiatives, two major pillars of Biden's original Build Back Better plan. It installs a 15 percent minimum tax rate on corporations, raising enough funds to also pay down the deficit. House Republicans are expected to reject the measure en masse.
Nevertheless, models still estimate major climate benefits coming from the legislation. Three widely cited models respectively estimate that the bill will bring U.S. planet-warming emissions, and lower than they were in 2005 by 2030.
New incentives for lower-carbon and carbon-free energy.
- Tax credits are extended for energy production and investment in technologies including wind, solar and geothermal energies. The investment tax credit also now applies to battery storage and biogas.
- Tax credits would be created or extended for additional technologies and energy sources including nuclear energy, hydrogen energy coming from clean sources, biofuels and technology that captures carbon from fossil fuel power plants.
- Many of the incentives contain bonuses for companies based on how much they pay their workers and whether they manufacture their steel, iron and other components in the U.S.
Consumers get tax credits to make cleaner energy choices.
- Tax credits are extended for residential clean energy expenses including rooftop solar, heat pumps and small wind energy systems. Consumers can get credits for 30 percent of expenditures through 2032, and the credit phases down after that.
- Tax credits of up to $7,500 are offered to consumers who buy electric vehicles — but this credit comes with stipulations that may make it difficult for vehicles to actually qualify, including a requirement that some of the minerals used in their batteries come from countries that have free-trade deals with the U.S. Minerals from China, a major supplier, wouldn’t meet that requirement.
- A tax credit would be expanded for energy efficiency in commercial buildings.
Some fossil fuel production on public lands would be bolstered.
- The future of solar and wind on public lands and wind in public waters would be tied to requirements to hold lease sales that open up new oil and gas production.
- The bill reinstates the results of a recent offshore oil and gas lease sale that was struck down on environmental grounds. The Interior Department would be required to hold at least three more offshore oil and gas lease sales by October 2023.
New programs boost investment in climate.
- A new program aims to reduce emissions of the planet-warming gas methane from oil and gas by both providing grants and loans to help companies reign in their emissions and levying fees on producers with excess methane emissions.
- $27 billion would go to a green bank that would provide more incentives for clean energy technology.
Fossil fuel production on public lands gets more expensive.
- Minimum royalties increase for companies to pay the government for oil and gas they extract on public lands and waters. A royalty is added to the extraction of gas that is later burned off or released as waste instead of sold as fuel.
Video: House passes Inflation Reduction Act, sends climate, tax and health bill to Biden (USA TODAY)
House approves Democrats climate, health bill, handing Biden a legislative victory
“Today is a day of celebration, a day we take another giant step in our momentous agenda,” said House Speaker Nancy Pelosi, D-Calif. She said the measure “meets the moment, ensuring that our families thrive and that our planet survives.” Republicans solidly opposed the legislation, calling it a cornucopia of wasteful liberal daydreams that would raise taxes and families’ living costs. They did the same Sunday but Senate Democrats banded together and used Vice President Kamala Harris’ tiebreaking vote t o power the measure through that 50-50 chamber.
Communities harmed by pollution get relief.
- $3 billion would go to environmental justice block grants — community-led programs addressing harms from climate change and pollutants, including $20 million for technical assistance at the community level, through fiscal 2026.
- More than $3 billion is allocated to funds for air pollution monitoring in low-income communities. Nearly half of the funds — $117 million — would specifically go to communities in close proximity to industrial pollutants.
- An excise tax on imported petroleum and crude oil products to fund the cleanup of industrial disaster sites increases from 9.7 cents to 16.4 cents per barrel. The reinstatement of the tax is projected to raise $11 billion.
- The bill permanently extends and increases the Black Lung Disability Trust Fund, a tax on coal production to finance claims from workers with the condition. Black lung, caused by long-term exposure to and inhalation of coal dust, is believed to affect at least 10 percent of coal miners with at least 25 years’ experience, according to a 2018 study by the National Institute for Occupational Safety and Health.
— Rachel Frazin and Zack Budryk
Democrats prepare to pass Inflation Reduction Act, securing big win for Biden
House Democrats are set to pass the Inflation Reduction Act on Friday, securing a huge win for the party and President Joe Biden’s agenda just months before the midterm elections in November. After more than a year of intraparty clashes and doubts about whether the spending legislation would make it through Congress, the vote on Friday is expected to be drama-free and without surprises.
The bill would allow Medicare to negotiate prices for some drugs and shore up health insurance subsidies. Democrats have been trying to enact the drug negotiation measure in particular for years over the fierce objections of the pharmaceutical industry.
- Medicare could negotiate lower prices for 10 high-cost drugs beginning in 2026, ramping up to 20 drugs by 2029. There is a steep penalty if a drug company doesn’t come to the table: a tax of up to 95 percent of the sales of the drug. There is also a ceiling that the negotiated price cannot rise above.
- In a deal with moderates including Sen. Kyrsten Sinema (D-Ariz.), only older drugs are subject to negotiation after a period of nine years for most drugs and 13 years for more complex “biologic” drugs. That means the negotiations are more limited than many Democrats wanted.
- The provisions are estimated to save the federal government more than $200 billion over 10 years.
Drug costs can be capped, but largely only for Medicare.
The bill includes other measures to cap drug costs. The provisions still largely apply only to seniors on Medicare, not the millions of people who get health insurance through their jobs, in part because complex Senate rules limited how expansive the provisions would be.
The Inflation Reduction Act may save the fossil fuel industries
Carbon capture certainly is the holy grail for converting federal tax credits into future oil industry profits. Even oil industry supporters should pause and consider what it means to make future U.S. oil production dependent on massive federal subsidies and construction of a national carbon pipeline network entirely dependent on eminent domain. From a climate change perspective, subsidized CO2 EOR could result in a huge amount of additional crude oil being pumped and burned, both in the U.S. and globally.
- If drug companies raise prices in Medicare faster than the rate of inflation, they must pay rebates back to the government for the difference. Democrats tried to apply this provision to the private market, but the parliamentarian ruled it violated the Senate rules used to bypass a GOP filibuster.
- In one of the most tangible provisions for patients, the bill caps out-of-pocket drug costs at $2,000 a year for seniors on Medicare, starting in 2025.
- The bill also caps patients’ insulin costs at $35 a month, but only for seniors on Medicare. Republicans voted against overruling the Senate parliamentarian to extend that protection to patients with private insurance.
People enrolled in ACA plans get financial assistance boost.
- The bill includes a three-year extension of enhanced financial assistance to help people enrolled in Affordable Care Act plans afford premiums. The extra help otherwise would have expired at the end of this year. The provision expands eligibility to allow more middle-class people to receive premium help and increases the amount of help overall.
— Peter Sullivan
The bill would pay for climate and health care measures by introducing new taxes on large corporations and going after wealthy tax cheats.
'Changed history': Gore, environmentalists react to landmark climate change bill
'Changed history': Gore, environmentalists react to landmark climate change billTo many longtime leaders in the climate movement, it is a watershed moment: a directional shift from inaction and fossil fuel dependence to a clean energy future. Recognizing the bill’s limitations and shortcomings — it is expected, at most, to reduce U.S. greenhouse gas emissions 40% from 2005 levels by 2030 — they argued it is only the first step of many that will be taken.
The centerpiece of the bill’s tax plan is a 15 percent minimum tax on the income that big corporations report to their shareholders.
- The tax is expected to raise $222 billion over the next decade, the largest chunk of the $740 billion raised by the legislation. It applies to companies reporting $1 billion in annual earnings and would impact only around 150 large firms, according to the Joint Committee on Taxation.
- At Sinema’s request, the tax would exempt companies taking advantage of accelerated depreciation, a popular deduction that helps pay for capital investments such as new equipment and small businesses that are subsidiaries of private equity firms.
New IRS funding aims to boost tax collection.
- The IRS will receive $80 billion to increase enforcement, an effort that is expected to net an additional $204 billion in taxpayer money. The Treasury Department and IRS have assured that wealthy individuals and corporations, whose audit rates have decreased more sharply in recent years relative to regular Americans, are the intended targets.
- Another $15 million funds a task force to determine how the IRS can deliver a “direct e-file tax return system” that would presumably replace or compete with commercial products, some of which have been accused of deceptive marketing practices.
- The bill also extends a set of limitations on losses that businesses can deduct from their taxes. The limits, which are expected to raise $52 billion, prevent wealthy individuals from significantly bringing down or even wiping out their income tax liability.
New tax takes aim at stock buybacks.
- The bill enacts a 1 percent excise tax on stock buybacks to replace the revenues lost by appeasing Sinema. Democrats expect the provision to raise $74 million over a decade, primarily from large companies such as Apple, Nike and ExxonMobil.
Share repurchases by S&P 500 companies have soared in recent years and are on track to surpass $1 trillion this year. Companies buy back their stock to reward shareholders and boost their stock price by artificially limiting supply. Democrats have criticized the practice, arguing that companies should instead invest in workers and innovation.
— Tobias Burns and Karl Evers-Hillstrom
Perspective: How conservatives should view the climate provisions in the inflation act .
The Inflation Reduction Act is not a ‘socialist wish list’ like critics have charged. There are initiatives within the bill that conservatives can and should support.One group of Americans is saying the Inflation Reduction Act is the best possible solution for the American economy — that it won’t raise taxes or nudge inflation even higher — while claiming its passage will slash American carbon emissions by an additional 10%.