WASHINGTON (AP) – The largest investment ever made in the US to fight climate change. A resilient cap on out-of-pocket prescription drug costs for Medicare seniors. A new minimum corporation tax to ensure big businesses pay their fair share.
And billions remain to pay federal deficits.
All in all, the Democrats’ “Inflation Reduction Act” may not do much to immediately tame inflationary price hikes. But the package headed for final approval in Congress and the White House for President Joe Biden’s signature will touch countless American lives with long-running party proposals.
Not as robust as Biden’s initial ideas for rebuilding America’s public infrastructure and family support systems, the commitment to health care, climate change and deficit reduction strategies is also an impressive turnaround from the election year, a smaller but no less substantial product that returned to political life after collapsing last year.
Only Democrats support the package, and all Republicans are expected to vote against it. Republicans deride the 730-page bill as a major government overreach and point particular criticism at its $80 billion investment in the Internal Revenue Service to hire new employees and chase tax dodges.
Voters will be left to decide in the November elections, when control of Congress will be decided.
That’s what’s in the estimated $740 billion package, made up of $440 billion in new spending and $300 billion to reduce deficits, that may finally pass the House on Friday.
LESS PRESCRIPTION DRUG COSTS
Throwing in a long-sought goal, the bill would allow the Medicare program to negotiate prescription drug prices with drug companies, saving the federal government about $288 billion over the 10-year budget period.
The result is expected to lower drug costs for seniors, including a $2,000 out-of-pocket limit for older adults who buy prescriptions at pharmacies.
The revenue raised would also go towards giving free vaccinations to the elderly, who are now among the few without free access, according to a summary document.
Seniors would also have insulin prices capped at $35 a month.
HELP PAY FOR MEDICAL INSURANCE
The bill would expand subsidies provided during the COVID-19 pandemic to help some Americans who purchase health insurance on their own.
Under previous pandemic relief, additional aid was due to expire this year. But the bill would allow the assistance to continue for three more years, lowering insurance premiums for about 13 million people who purchase their own health care policies through the Affordable Care Act.
THE BIGGEST AMERICAN INVESTMENT “BY FAR” IN CLIMATE CHANGE
The bill would infuse nearly $375 billion over the decade into climate change strategies that Democrats believe could put the country on a path to cut greenhouse gas emissions by 40 percent by 2030 and “It would represent the largest climate investment in US history, by far.”
For consumers, that means tax credits for buying electric vehicles: $4,000 for used vehicles and up to $7,500 for new, eligible for households with incomes of $300,000 or less for couples or single income earners of $150,000 or less.
Not all electric vehicles will be fully eligible for the tax credits, thanks to requirements that components be manufactured and assembled in the US, and the most expensive cars costing more than $55,000 and higher-priced SUVs and trucks are excluded to $80,000.
There are also tax breaks for consumers to go green. One is a 10-year consumption tax credit for renewable energy investments in wind and solar.
For businesses, the bill has $60 billion for a clean energy manufacturing tax credit and $30 billion for a wind and solar production tax credit, seen as a way to boost and support industries that can help curb the country’s reliance on fossil fuels.
The bill also offers tax credits for nuclear power and carbon capture technology that oil companies like Exxon Mobil have invested millions of dollars to advance.
The bill would impose a new tax on excess methane emissions from oil and gas drilling, while giving fossil fuel companies access to more leases on federal lands and waters.
A late addition pushed by Sen. Kyrsten Sinema, D-Ariz., and other Democrats in Arizona, Nevada and Colorado would designate $4 billion to combat a mega-drought in the West, including conservation efforts in the Colorado River Basin , which nearly 40 million Americans depend on for drinking water.
HOW TO PAY FOR ALL THIS?
One of the bill’s biggest takeaways is a new 15 percent minimum tax on companies that make more than $1 billion in annual profits.
It’s a way to crack down on about 200 US companies that avoid paying the standard 21% corporate tax rate, including some that end up paying no tax at all.
The new minimum business tax would kick in after fiscal year 2022 and raise more than $258 billion over the decade.
A new 1% excise tax will also be imposed on share buybacks, raising about $74 billion over the decade.
According to the nonpartisan Congressional Budget Office, the savings from allowing Medicare to negotiate with drug companies is expected to add $288 billion over 10 years.
The bill sticks to Biden’s original promise not to raise taxes on families or businesses making less than $400,000 a year.
However, money is also made by raising the IRS to look for tax cheats. The bill proposes an $80 billion investment in taxpayer services, enforcement and modernization, which is expected to raise $203 billion in new revenue, a net gain of $124 billion over the decade.
EXTRA MONEY TO PAY DEFICIENTS
With about $740 billion in new revenue and about $440 billion in new investments, the bill promises to allocate about $300 billion of the difference to deficit reduction.
Federal deficits ballooned during the COVID-19 pandemic as federal spending soared and tax revenues fell as the nation’s economy was battered by shutdowns, closed offices and other massive changes.
The nation has seen deficits rise and fall in recent years. But the overall federal budget is on an unsustainable path, according to the Congressional Budget Office, which recently released a new report on long-term projections.
WHAT HAS BEEN LEFT BEHIND?
The package, nowhere near the sweeping Build Back Better program that Biden once envisioned, remains a major undertaking and, along with COVID-19 relief and the 2017 GOP tax cuts, is among the biggest bills from Congress in years.
While Congress passed and Biden signed a bipartisan $1 trillion infrastructure bill for roads, broadband and other investments that was part of the White House’s initial vision, Democrats’ other big priorities they have escaped
Gone, for now, are plans for free preschool and community college, as well as the nation’s first paid family leave program that would have provided up to $4,000 a month for births, deaths and other basic needs. The enhanced child care credit that provided $300 a month during the pandemic may also expire.
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Associated Press writer Matthew Daly contributed to this report.