WASHINGTON (AP) — The biggest investment ever in the U.S. to fight climate change. A hard-fought cap on out-of-pocket prescription drug costs for Medicare recipients. A new corporate minimum tax to ensure big businesses pay their share.
And billions left over to pay down federal deficits.
All told, the Democrats’ “Inflation Reduction Act” may not do much to immediately tame inflationary price hikes. But the package that won final congressional approval in the House on Friday and is heading to the White House for President Joe Biden’s signature will touch countless American lives with longtime party proposals.
Not as robust as Biden’s initial ideas to rebuild America’s public infrastructure and family support systems, the compromise of health care, climate change and deficit-reduction strategies is also a stunning election year turnaround, a smaller but not unsubstantial product brought back to political life after having collapsed last year.
Democrats alone supported the package, as Republicans lined up against it. Republicans deride the 730-page bill as big government overreach and point particular criticism at its $80 billion investment in the IRS to hire new employees and go after tax scofflaws.
Voters will be left to sort it out in the November elections, when control of Congress will be decided.
Here’s what’s in the estimated $740 billion package — made up of $440 billion in new spending and $300 billion toward easing deficits— that is up for final approval Friday in the House.
LOWER PRESCRIPTION DRUG COSTS
Launching a long-sought goal, the bill would allow the Medicare program to negotiate some prescription drug prices with pharmaceutical companies, saving the federal government some $288 billion over the 10-year budget window.
The result is expected to lower costs for older adults on medications, including a $2,000 out-of-pocket cap for older adults buying prescriptions from pharmacies.
The revenue raised would also be used to provide free vaccinations for seniors, who now are among the few not guaranteed free access, according to a summary document.
Seniors would also have insulin prices capped at $35 a month.
HELP PAYING FOR HEALTH INSURANCE
The bill would extend the subsidies provided during the COVID-19 pandemic to help some Americans who buy health insurance on their own.
Under earlier pandemic relief, the extra help was set to expire this year. But the bill would allow the assistance to keep going for three more years, lowering insurance premiums for some 13 million people who are purchasing their own health care policies through the Affordable Care Act.
BIGGEST U.S. INVESTMENT ‘BY FAR’ IN CLIMATE CHANGE
The bill would infuse nearly $375 billion over the decade in climate change-fighting strategies that Democrats believe could put the country on a path to cut greenhouse gas emissions 40% by 2030, and “would represent the single biggest climate investment in U.S. history, by far.”
For consumers, that means tax rebates to buy electric vehicles — $4,000 for used vehicle purchase and up to $7,500 for new ones, eligible to households with incomes of $300,000 or less for couples, or single people with income of $150,000 or less.
Not all electric vehicles will fully qualify for the tax credits, thanks to requirements that component parts be manufactured and assembled in the U.S. And pricier cars costing more than $55,000 and SUVs and trucks priced above $80,000 are excluded.
There’s also tax breaks for consumers to go green. One is a 10-year consumer tax credit for renewable energy investments in wind and solar.
For businesses, the bill has $60 billion for a clean energy manufacturing tax credit and $30 billion for a production tax credit for wind and solar, seen as ways to boost and support the industries that can help curb the country’s dependence on fossil fuels.
The bill also gives tax credits for nuclear power and carbon capture technology that oil companies such as Exxon Mobil have invested millions of dollars to advance.
The bill would impose a new fee on excess methane emissions from oil and gas drilling while giving fossil fuel companies access to more leases on federal lands and waters.
A late addition pushed by Sen. Kyrsten Sinema, D-Ariz., and other Democrats in Arizona, Nevada and Colorado would designate $4 billion to combat a mega-drought in the West, including conservation efforts in the Colorado River Basin, which nearly 40 million Americans rely on for drinking water.
HOW TO PAY FOR ALL OF THIS?
One of the biggest revenue-raisers in the bill is a new 15% minimum tax on corporations that earn more than $1 billion in annual profits.
It’s a way to clamp down on some 200 U.S. companies that avoid paying the standard 21% corporate tax rate, including some that end up paying no taxes at all.
The new corporate minimum tax would kick in after the 2022 tax year and raise more than $258 billion over the decade.
There will also be a new 1% excise tax imposed on stock buybacks, raising some $74 billion over the decade.
Savings from allowing Medicare’s negotiations with the drug companies is expected to bring in $288 billion over 10 years, according to the non-partisan Congressional Budget Office.
The bill sticks with Biden’s original pledge not to raise taxes on families or businesses making less than $400,000 a year.
Yet money is also raised by boosting the IRS to go after tax cheats. The bill proposes an $80 billion investment in taxpayer services, enforcement and modernization, which is projected to raise $203 billion in new revenue — a net gain of $124 billion over the decade.
EXTRA MONEY TO PAY DOWN DEFICITS
With some $740 billion in new revenue and around $440 billion in new investments, the bill promises to put the difference of about $300 billion toward deficit reduction.
Federal deficits spiked during the COVID-19 pandemic when federal spending soared and tax revenues fell as the nation’s economy churned through shutdowns, closed offices and other massive changes.
The nation has seen deficits rise and fall in recent years. But overall federal budgeting is on an unsustainable path, according to the Congressional Budget Office, which recently put out a new report on long-term projections.
WHAT’S LEFT BEHIND?
The package, nowhere near the sweeping Build Back Better program Biden once envisioned, remains a sizable undertaking and, along with COVID-19 relief and the GOP 2017 tax cuts, is among the more substantial bills from Congress in years.
While Congress did pass and Biden signed into law a $1 trillion bipartisan infrastructure bill for highways, broadband and other investments that was part of the White House’s initial vision, the Democrats’ other big priorities have slipped away.
Gone, for now, are are plans for free pre-kindergarten and community college, as well as the nation’s first paid family leave program that would have provided up to $4,000 a month for births, deaths and other pivotal needs. Also allowed to expire is the enhanced child care credit that was providing $300 a month during the pandemic.