A historically large federal investment towards combating climate change, extending health care subsidies, and capping prescription drug costs are just some of the items in the Inflation Reduction Act (IRA), which was signed into law by President Joe Biden Tuesday, following its passage along party lines in both the Senate (51-50) and House (220-207). The legislation saw no support from Sen. Ron Johnson (R) or his Republican colleagues in the House.
As the “final piece” to his initial domestic agenda, Biden hailed the legislation as an example of how “the American people won, and the special interests lost.” The legislation is accounted for by a new 15 percent minimum corporate tax aimed at large companies that have been underpaying, and stronger IRS enforcement on wealthy individuals and entities violating tax laws. The billions leftover will go towards paying federal deficits.
“Our reforms will close tax loopholes for big, billion-dollar corporations and make them pay a fairer share of taxes so we can cut the deficit and lower the out-of-pocket costs for working families,” Sen. Tammy Baldwin (D) said in a press statement voicing her support for the IRA. “Our legislation will lower energy costs for consumers […] and take on the climate crisis.”
“Today, while Senate Republicans stand on the sidelines with the big corporations and drug companies […] I am voting to fight inflation and deliver some fairness and relief for working families,” she continued.
Medicaid recipients and older adults will benefit from a $2,000 price cap for annual prescription drug costs outlined in the IRA, while older Americans will see a $35 monthly price cap for insulin. Additionally, funds will go towards providing free vaccinations for senior Americans, an especially vulnerable and under-vaccinated demographic.
The federal government expects to save $288 billion over the next 10 years thanks to the IRA, which allows the Medicare program to negotiate prices with pharmaceutical companies to finance these price caps.
Another health item in the IRA is the three-year extension of pandemic relief Affordable Care Act subsidies for an estimated 13 million recipients, which helps to avert what would have been an over 50 percent increase in monthly premium payments for millions of Americans.
But the biggest part of the legislation comes in the 10-year, $375 billion commitment towards combating climate change in what is being called “the single biggest climate investment in U.S. history, by far.” Democrats hope this legislation will help the U.S. meet the goal of cutting greenhouse gas emissions by 40 percent in 2030.
In concrete terms, this means Americans will get rebates and cuts for going green, including a tax credit for those who rely more on renewable energy, and tax rebates of up to $7,500 for those who qualify when purchasing electric vehicles.
The legislation also includes a litany of green-friendly tax credits for businesses that rely on renewable energy or help to curb fossil fuel dependence, including $60 billion in tax credits for clean energy manufacturing.
Meanwhile, the legislation also carries short term mitigation strategies for fighting climate change, such as a new fee for excess methane emissions from oil and gas companies, though it comes at the cost of granting companies more leases of federal land and waters, and $4 billion being allocated towards addressing the mega-drought in the West.
While the IRA, contrary to its name, won’t affect immediate inflationary hikes, the legislation is expected to have long-term effects on the economy and consumer habits.
The signing of the IRA comes less than three months before the midterm elections, where Democrats are hoping that the party and president’s recent legislative successes, including this one, can help bolster voter turnout amidst lagging approval ratings for Biden.
Other legislative efforts passed by Democrats lately include gun checks for young buyers, increased funding into semiconductor technologies, and expanding health care services for veterans.