What is the Inflation Reduction Act? Everything to know about one of Biden's big laws
Anna Kaufman, USA TODAY
Updated 5 min read
The Inflation Reduction Act, which passed last summer and is already affecting major parts of the economy, is designed to impact everything from transportation and the environment to insulin prices and corporate taxes.
Some of the provisions are meant to help individuals with their own bills or expenses, while other are designed to push the economy forward with incentives for eco-friendly business practices. Aviation executives, for example, have been praising the bill's provisions for tax credits for sustainable aviation fuel.
Here's what you need to know about what's really in the bill, who voted for it, and how it might affect your pocket book.
What is the Inflation Reduction Act of 2022?
The Inflation Reduction Act is a large legislative package passed by Congress and signed into law by President Joe Biden aimed at fighting inflation, lowering the deficit, reducing the price of prescription drugs for seniors, and reducing the country's carbon emissions.
The Inflation Reduction Act includes broad swaths of legislation targeting different sectors of the economy. Among its most prominent provisions are:
An expansion of Medicare benefits to include free vaccines, insulin prices capped at $35 a month, and a ceiling for prescription drug prices at $4,000 in 2024 and $2,000 in 2026
Cuts in the cost of home energy
Investments into clean energy and tax breaks meant to reduce carbon emissions 40% by 2030
A new 15% minimum corporate tax and a 1% fee on stock buybacks
Expanded IRS tax assistance and enforcement through investment of $80 billion over the next 10 years
Extension of the Affordable Care Act's federal subsidies to 2025. These subsidies lower the cost of premiums for enrollees.
The Inflation Reduction Act by the numbers
Figures produced by the Congressional Budget Office and the Joint Committee on Taxation estimate investments and revenue raised.
Investments:
$369 billion in Energy Security and Climate Change
$64 billion in Affordable Care Act Extension
Revenue raised:
$288 billion through Prescription Drug Pricing Reform
$313 billion establishment of a 15% Corporate Minimum Tax
President Joe Biden signs the Inflation Reduction Act on Aug. 16, 2022.
Who wrote the Inflation Reduction Act?
The legislation is the culmination of efforts by both the Biden administration and its allies on Capitol Hill who have long pushed for lower drug prices, a more progressive tax code and efforts to combat the worsening climate crisis.
The final compromise was struck in July by Senate Majority Leader Chuck Schumer, D-N.Y., and Sen. Joe Manchin, D-W.Va. It followed weeks of gridlock within the Democratic party, with negotiations often coming to a standstill. Manchin, the Senate's most moderate Democrat, had held out his vote for previous versions, citing various concerns over increased government spending and climate provisions. But the lawmakers finally agreed upon and introduced a final version.
What's in the Inflation Reduction Act for home energy?
One of the ways in which the bill aims to fight climate change is with home energy rebates and tax credits, making it more affordable to access clean energy.
For example, homeowners who invest in an energy-efficient heat pump water heater will be eligible for a rebate as high as $1,750. Those purchasing an upgraded breaker box, which assists in preparation for an all-electric home, can be eligible for a rebate value of up to $4,000. Another rebate program offers rebates up to $840 for the purchase of an electric stove, cooktop, range or oven.
Additional home energy improvements eligible to receive rebates through the Inflation Reduction Act include: improving insulation improvement, purchase of an electric heat pump dryer to do your laundry, and switching to installation of an electric heat pump for a home's cooling and heating needs.
What is in the Inflation Reduction Act for solar?
The Inflation Reduction Act offers a 30% tax credit for families who install solar panels on their home roofs. Given the average cost of installing a rooftop solar-powered system is about $19,000, that amounts to $5,700 in savings, according to the Environmental Defense Fund.
The provision is meant as an incentive to divest from fossil fuels and bring the U.S. closer to its carbon emission reduction goals.
How does the Inflation Reduction Act affect taxes?
The Inflation Reduction Act is designed to adhere to Biden's campaign promise not to raise taxes on families or small businesses that make less than $400,000 a year, though GOP critics say it will have an indirect effect through tax increases to corporations.
And, there is a new corporate tax. Large corporations earning over $1 billion a year will have to pay a minimum 15% tax. It is aimed in part at closing loopholes that allow hundreds of companies to skirt payment of the standard 21% corporate tax.
The new tax is expected to raise some $313 billion over the next ten years. Since the bill is projected to raise more in tax increases than it spends, it is expected to significantly reduce the federal deficit.
The bill also allocates billions of dollars to the IRS over the course of the next ten years, much of it to hire about 80,000 workers: a combination of agents, auditors and taxpayer support staff.
Does the Inflation Reduction Act cap insulin prices?
Yes, for Medicare recipients. Enrollees in Medicare, the federal health insurance program for those 65 years and older, will be protected by a $35 cap on their monthly insulin supply beginning next year.
This is not a broad federal cap since it applies only to those on Medicare, but the bill does aim to reduce the cost of prescription drugs through other provisions.
Who voted for the Inflation Reduction Act of 2022?
The Inflation Reduction Act passed the Senate 51-50 on Aug. 7, 2022 with all 50 Democratic senators voting in favor and Vice President Kamala Harris stepping in to cast the tie-breaking vote in her dual role as Senate president. No Republican senators supported passage of the policy package.
Similarly in the House of Representatives, all Democratic representatives voted in favor and all members of the opposing party voted against, with the final count at 220-207.