What’s in the Inflation Reduction Act
The Inflation Reduction Act is a slimmed-down version of the Build Back Better bill, which aimed to make historic investments in the nation’s social safety net. The new bill makes the largest investment in combating climate change in U.S. history, lowers the cost of prescription drugs and raises taxes on corporations.
Here are the big provisions:
- Creation of a 15% corporate minimum tax rate: Corporations with at least $1 billion in income will have a new tax rate of 15%. Taxes on individuals and households won’t be increased. Stock buybacks by corporations will face a 1% excise tax.
- Prescription drug price reform: One of the most significant provisions of the Inflation Reduction Act will allow Medicare to negotiate the price of certain prescription drugs, bringing down the price beneficiaries will pay for their medications. Medicare recipients will have a $2,000 cap on annual out-of-pocket prescription drug costs, starting in 2025.
- IRS tax enforcement: The IRS has been sounding the alarm for years about being underfunded and being unable to deliver on its duties. The bill invests $80 billion in the nation’s tax agency over the next 10 years.
- Affordable Care Act (ACA) subsidy extension: Currently, medical insurance premiums under the ACA are subsidized by the federal government to lower premiums. These subsidies, which were scheduled to expire at the end of this year, will be extended through 2025. Approximately 3 million Americans could lose their health insurance if these subsidies weren’t extended, according to the U.S. Department of Health and Human Services.
- Energy security and climate change investments: The bill includes numerous investments in climate protection, including tax credits for households to offset energy costs, investments in clean energy production and tax credits aimed at reducing carbon emissions.
The bill passed with all 50 Democratic votes in the Senate on Aug. 7. Democrats were able to secure two key votes, from Senators Joe Manchin (D-W.Va) and Kyrsten Sinema (D-AZ), after the pair opposed earlier versions of the bill. Sinema, the last party holdout, expressed support for the bill after the carried-interest loophole provision was dropped.
The bill was passed in the Senate without Republican support under the reconciliation process. The House passed the bill 220-207 on Aug. 12.
