After months of negotiation, the budget reconciliation bill known as the Inflation Reduction Act has finally been signed into law by President Biden. The bill aims to reduce costs for families during the current spike in inflation by investing heavily in healthcare and tackling climate change.
The bill invests over $400 billion between energy security and climate change measures, and an expansion of the Affordable Care Act including prescription drug benefits. It will also reduce the federal deficit by $300 billion. These costs are covered through a combination of IRS tax enforcement for corporate and wealthy taxpayers making more than $400,000 a year, new fees on stock buybacks, and prescription drug pricing reform.
How will my family be impacted?
Millions of Americans will no longer see spikes in their health insurance premiums because the bill extended the subsidies on healthcare plans bought on the federal health insurance exchange for another three years. Medicare recipients will also see some major improvements to their healthcare in the coming years.
First, the price of insulin for those on Medicare will be capped at $35 per month. And the total cost for out-of-pocket prescription drug costs will be capped at $2,000 starting in 2025. The bill also will keep the cost of certain expensive prescription drugs down by allowing the government to negotiate prices.
The Inflation Reduction Act is the largest investment in federal clean energy in U.S. history, and will lower greenhouse gas emissions by 40 percent by 2030—a feat scientists say is essential if we want to stop runaway climate change.
It does this by investing in renewable technology, like solar panels or electric vehicle components, and then helping everyday Americans actually use these energy sources in their lives. It includes tax credits and other financial incentives that will make clean energy options more accessible, especially to those families who are lower- to middle-income. The bill includes things like:
- Energy rebate programs for lower-income families to help people electrify their home appliances;
- 10 years of consumer tax credits to make homes more energy efficient by making heat pumps, rooftop solar, electric HVAC and water heaters more affordable;
- A $4,000 tax credit for lower- and middle-income individuals who buy used electric vehicles, and up to $7,500 tax credits for those who buy new electric vehicles;
- A $1 billion grant program to make affordable housing more energy efficient.
The bill covers the costs of these programs through a number of tax reforms and enhanced tax enforcement. The legislation institutes a 15 percent minimum tax for corporations making $1 billion or more in income, which is projected to bring in over $300 billion in revenue.
The increased tax enforcement will only impact families making over $400,000 per year. There will also be a one percent excise tax on corporate stock buybacks, which will take effect next year. This measure represents one of the first new corporate taxes in decades.
Biden spoke about the negotiations at the White House last month, saying, “With this legislation, we’re facing up to some of our biggest problems and we’re taking a giant step forward as a nation…This bill is far from perfect. It’s a compromise. But it’s often how progress is made.”