President Biden Signs Inflation Reduction Act Into Law

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Photo Credit: Drew Angerer via Getty Images

By Ariel Peterson

 

WASHINGTON, D.C.—This month, President Joe Biden signed H.R. 5376, the historic Inflation Reduction Act, marking it the largest, most comprehensive commitment the United States has ever made to fighting climate change.

 

Introduced to the House of Representatives by Representative John Yarmuth of Kentucky on Sept. 27, 2021, H.R. 5376 passed the House on Nov.19, 2021 and the Senate on Aug. 7, 2022. President Biden signed it into law on Aug. 16, 2022.

 

Though H.R. 5376 is called the Inflation Reduction Act, many of its major provisions are actually aimed at addressing climate change, as well as exorbitant healthcare costs. 

 

For example, the law reforms tax credits for renewable sources of energy, both extending pre-existing tax credits that expired in 2022 and creating new ones. The White House expects these tax credits will contribute to “American clean energy supply chains, by incentivizing domestic production in clean energy technologies like solar, wind, carbon capture, and clean hydrogen.”

 

Tax credits for nonbusinesses have also been extended and even increased in some cases to help families make their homes and daily lives more energy efficient. 

 

The Biden administration estimates that a new 30% tax credit will make renewable energy both more desirable and more accessible to middle-class and lower-income consumers. 7.5 million more families will be able to install solar panels on their roofs, and “$7,500 in tax credits for new electric vehicles and $4,000 for used electric vehicles” will encourage families to purchase electric instead of gasoline-fueled cars. 

 

A second benefit of these tax credits is that they will create a $60 billion investment in better clean energy jobs. Bonus tax credits are included for businesses that increase the energy efficiency of homes or produce renewable energies and technologies if they pay prevailing wages and hire registered apprentices, which will allow workers to be paid higher union wages.

 

According to Senate Democrats, the Inflation Reduction Act’s tax credits and rebates will save consumers $500 on energy bills, reducing them to $1,000 per year.


Aside from tax credits, the Inflation Reduction Act directly provides funding to a number of government agencies so they can invest in reducing their usage of fossil fuels and mitigating the effects of climate change in their respective jurisdictions. Such funding will allow for the Department of Agriculture to work on restoring forests and building voluntary conservation programs, the Department of Housing and Urban Development to address the impact of climate change on affordable housing, the Department of Transportation to award grants for projects that reduce the greenhouse gas emissions of aircrafts, and the Department of Energy for rebates to encourage homeowners to increase their energy efficiency, among many other things.

 

Taken together, tax credits and new funding represent, Senate Democrats estimate, a $369 billion investment in energy security and the prevention and mitigation of climate change, which will contribute to approximately a staggering 40% reduction in carbon emissions by 2030.

 

Another issue the Inflation Reduction Act tackles is the high costs of healthcare. 

 

First, the Centers for Medicare and Medicaid Services will now be required to negotiate the costs of prescription drugs. The White House expects five to seven million Medicare beneficiaries to see lower prices for their prescription drugs as a result. 

 

Medicare beneficiaries will also see caps on how much they pay for drugs out-of-pocket. In 2024, they will not have to pay more than $4,000 out-of-pocket annually, and this maximum is halved to $2,000 in 2025.

 

Expanded Medicare benefits will also include free vaccines in 2023 and the cost of insulin lowered to $35 a month, which will impact the 3.3 million Medicare beneficiaries who live with diabetes. 

 

Finally, the Inflation Reduction Act invests approximately $64 billion into extending health insurance premium subsidies for those who benefit from the Affordable Care Act.

 

The new law’s healthcare provisions both raise revenue for the government, in the form of $265 billion from prescription drug price reform, and save Americans money, with 13 million people saving an estimated $800 annually on health insurance premiums. These provisions also make health insurance available to 3 million more Americans than before it.

 

With so much of the government’s revenue to be invested in climate change mitigation and lowering healthcare costs, the question of where such revenue will come from arises. 

 

The Inflation Reduction Act actually addresses this question through its reforms to the tax code.

 

Before the new law, some of the nation’s largest and most profitable corporations paid exactly $0 in federal income taxes. This contributed to the White House’s estimation that the top one percent of earners is able to evade nearly $160 billion in taxes every year.

 

However, the Inflation Reduction Act will put an end to these evasions by imposing a 15 percent corporate minimum tax on the largest corporations, as well as a one percent fee on corporate stock buybacks. 

 

The Congressional Joint Committee on Taxation calculates that the 15 percent corporate minimum tax will raise approximately $222 billion and that the stock buyback fee will raise about $74 billion.

 

The White House is careful to point out that none of these taxes apply to middle- and lower-income families, stating that “no family making less than $400,000 will see their taxes go up a penny” and that the Inflation Reduction Act’s tax reforms are “an important component of building an economy that rewards work rather than wealth and doesn’t let the rich and powerful get away with playing by a separate set of rules.”


In terms of whether H.R. 5376 lives up to its name, its tax code reforms lead 126 leading economists, according to the White House, to expect a reduction in the federal deficit, which will in turn fight inflation.

 

Though the Inflation Reduction Act is a massive achievement, it has not been greeted with universal acclaim.

 

Crucially, not a single Republican in either the House of Representatives or the Senate voted to pass it, and the resulting tie in the Senate had to be broken by Vice President Kamala Harris.

 

On the liberal side, climate activist group the Sunrise Movement called the Inflation Reduction Act “a forced compromise between corporate oil lobbyists and young people who are fighting for a livable future” and stated bluntly that “the science of the climate crisis does not grade on a curve— and it’s clear that the IRA is not enough.”

 

Yet few deny that the Inflation Reduction Act is historic, and though it may not be a panacea against climate change and wealth inequality, it is certainly a significant step in those directions.

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About The Author

Ariel Peterson is a second-year Political Science major and English minor at UCLA. After graduation, she is excited to attend law school. She intends on becoming a public interest lawyer to fight injustice in the criminal justice system and help people whose lives have been negatively impacted by the law.

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9 thoughts on “President Biden Signs Inflation Reduction Act Into Law”

  1. Keith Olson

    President Biden Signs Inflation Reduction Act Into Law

    That what Democrats do these days, they name a bill something that it’s not in order to try and curry favor for it.  When you actually get down to what the bill is about it actually is basically The Green New Deal under a different name because the bill they passed will increase inflation if anything.

     

  2. Walter Shwe

    Before the new law, some of the nation’s largest and most profitable corporations paid exactly $0 in federal income taxes. This contributed to the White House’s estimation that the top one percent of earners is able to evade nearly $160 billion in taxes every year.
    However, the Inflation Reduction Act will put an end to these evasions by imposing a 15 percent corporate minimum tax on the largest corporations, as well as a one percent fee on corporate stock buybacks.
    The Congressional Joint Committee on Taxation calculates that the 15 percent corporate minimum tax will raise approximately $222 billion and that the stock buyback fee will raise about $74 billion.

    This will force mostly Republican wealthy corporations and individuals from being loathsome freeloaders.

  3. Keith Olson

    This will force mostly Republican wealthy corporations and individuals from being loathsome freeloaders.

    Wrong, this will force companies to raise the price of their goods and/or services in order to cover higher tax costs and actually increase inflation.

    BTW, what is a Republican corporation anyway?  Are corporations registered as Republican or Democrat or was that just a way of taking a cheap shot?

    1. Walter Shwe

      I love taking cheap shots, especially towards 1 party that richly deserves it.

      Many insanely profitable corporations move their profits off shore to escape paying US taxes all together. Others use questionable tax shelters to shield their profits. They won’t raise prices one cent. This will lower inflation by reducing the federal deficit. This will also reduce the enormous size of executive bonuses.

      1. Keith Olson

        They won’t raise prices one cent.

        And you know this how?  Pardon me if I don’t believe you.  All corporates costs are passed on down to the consumer.  It’s economics 101

      2. Keith Olson

        The so-called “Inflation Reduction Act” under consideration in Congress would not only fail to tame inflation, but it would actually increase reckless spending and raise taxes on hardworking Americans. As a result, consumers would pay more—to the IRS and on everyday goods and services.
        Despite its name, the “Inflation Reduction Act” would do nothing to tame the inflation crisis and would instead make inflation even worse. The Wharton School of Business, for example, estimates that the plan would have no statistically significant effect on reducing inflation, now or in the future.18 In fact, the legislation would actually increase inflation over the next two years as new spending measures go into effect.19 Indeed, the combination of frontloaded spending hikes and higher taxes in the legislation would undoubtedly result in higher prices for consumers.
        Worse yet, the legislation has provisions that would directly hurt Americans’ wallets in the most critical areas. President Biden’s regulatory war on American energy has already added fuel to the inflation fire, with Americans paying the price for those regulatory actions at the gas pump and on their electric bills.20 Gas prices have skyrocketed by nearly 90 percent since President Biden took office, even after falling from record highs in June 2022.21
        https://thefga.org/paper/inflation-reduction-act-would-hurt-americans-pocketbooks/#:~:text=The%20so-called%20“Inflation%20Reduction%20Act”%20under%20consideration%20in,Bidenflation%20has%20plunged%20the%20economy%20into%20a%20recession

         

  4. Walter Shwe

    While experts don’t see a rapid curb to inflation through this bill, there are a range of measures to help with high costs. For instance: 

    POLITICS 
    Inflation and climate change tackled in new Senate deal that Biden calls ‘historic’

    The bill offers a number of tax credits for people switching to cleaner energy sources, including electric vehicles and rooftop solar panels. Those incentives will take effect in 2023, and according to Democrats, will mean a 40% cut in greenhouse emissions from 2005 levels by the end of the decade.
    The Internal Revenue Service will get a boost in funding, particularly to improve its customer service and tax enforcement. Akabas said that investment could help alleviate some of the challenges with long response times or getting tax refunds processed. It could also increase collection of taxes that are currently owed but go unpaid.
    Millions of Americans will continue to benefit from subsidies that help with rising health insurance premiums that were originally slated to expire next year.
    The bill will put a $2,000 annual cap on out-of-pocket prescription drugs for people insured by Medicare, which will be most impactful for senior citizens with illnesses such as cancer and multiple sclerosis. But that provision won’t materialize until 2025.

    “Prices are high now but we’re talking about prices that have been putting burdens on household budgets for decades,” said Rakeen Mabud, the chief economist of the Groundwork Collaborative, a progressive economics think tank.
    “We’ve been struggling with skyrocketing health care costs for a really long time and this bill is an important step forward.”

  5. Walter Shwe

    What are some changes I’ll see in the near future?
    While experts don’t see a rapid curb to inflation through this bill, there are a range of measures to help with high costs. For instance:

    POLITICS 
    Inflation and climate change tackled in new Senate deal that Biden calls ‘historic’

    The bill offers a number of tax credits for people switching to cleaner energy sources, including electric vehicles and rooftop solar panels. Those incentives will take effect in 2023, and according to Democrats, will mean a 40% cut in greenhouse emissions from 2005 levels by the end of the decade.
    The Internal Revenue Service will get a boost in funding, particularly to improve its customer service and tax enforcement. Akabas said that investment could help alleviate some of the challenges with long response times or getting tax refunds processed. It could also increase collection of taxes that are currently owed but go unpaid.
    Millions of Americans will continue to benefit from subsidies that help with rising health insurance premiums that were originally slated to expire next year.
    The bill will put a $2,000 annual cap on out-of-pocket prescription drugs for people insured by Medicare, which will be most impactful for senior citizens with illnesses such as cancer and multiple sclerosis. But that provision won’t materialize until 2025.

    “Prices are high now but we’re talking about prices that have been putting burdens on household budgets for decades,” said Rakeen Mabud, the chief economist of the Groundwork Collaborative, a progressive economics think tank.
    “We’ve been struggling with skyrocketing health care costs for a really long time and this bill is an important step forward.”
    https://www.npr.org/2022/08/11/1116229743/inflation-reduction-act-questions-answered

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