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National News

The Inflation Reduction Act Passed Congress, But What Is It?

Credit: iStock

Jeff Fuentes Gleghorn

The Inflation Reduction Act of 2022 narrowly passed the Senate on party lines after Vice President Harris cast the tie-breaking vote on August 7th. The bill enjoys widespread support from voters, with 73 percent of all voters and 52 percent of Republicans in favor, according to a poll from Data for Progress. The House of Representatives quickly passed the bill on August 12, the day they came back from a break. It now heads to President Biden to be signed into law. It is expected to pass the House as well, after which point President Biden will sign it into law. The Inflation Reduction Act is over 700 pages long, but can be broken down into three parts: healthcare savings, climate change investments, and tax updates.

The bill tackles skyrocketing health care costs in a few ways. First and most immediately, the Inflation Reduction Act will extend health insurance discounts for 13 million people who buy insurance through the Affordable Care Act. Those discounts were created earlier in the pandemic thanks to New Hampshire Senator Jeanne Shaheen. Without the Inflation Reduction Act they would have expired at the end of this year, which would increase insurance payments by hundreds of dollars. Shaheen made extending the discounts a priority again as Democrats worked on this bill, which will help the nearly 30,000 New Hampshire residents that the Kaiser Family Foundation estimates are benefiting from the subsidies. Second, the bill will help seniors enrolled in Medicare by placing a $2,000 annual cap on out-of-pocket medical costs. Finally, it gives the government the power to negotiate the prices of some medications, and will require pharmaceutical companies to pay “rebates” to the government if they increase medicine prices by more than inflation.

The Inflation Reduction Act also invests $370 billion into renewable energy and climate change. An analysis from Senator Schumer’s office found that the bill would reduce U.S. climate emissions by 40 percent by 2030. It creates new tax credits to encourage wind, solar, and other renewable power plants. There are also new tax credits for individuals and families to purchase electric vehicles and install energy-efficient heating and cooling in their homes. The household tax credits are based on a bipartisan bill that Senator Maggie Hassan introduced, and she pushed to ensure they were included in the Inflation Reduction Act as well.

All of this will be paid for with new taxes on wealthy businesses. According to a statement from President Biden, “It does not raise taxes on those making under $400,000 a year – not one cent.” Instead, the bill creates a minimum corporate tax and adds a new one percent tax on company stock buybacks, a practice many Democrats believe hurts the economy in order to help wealthy shareholders. 

The Inflation Reduction Act provides $80 billion to the Internal Revenue Service (IRS) to make sure that wealthy individuals and businesses pay what they are supposed to. In a letter to lawmakers, IRS Commissioner Charles Rettig said the money would be used “in areas of challenge for the agency — large corporate and global high-net-worth taxpayers,” adding that “These resources are absolutely not about increasing audit scrutiny on small businesses or middle-income Americans.” According to the Congressional Budget Office, a non-partisan group that studies bills for lawmakers, the IRS provisions will reduce the federal deficit by over $200 billion. Each of the major sections of the bill are popular with voters on their own, and Democrats are expected to champion this victory in the last months of the election season.