On Aug. 16, 2022, President Biden signed the $740 billion Inflation Reduction Act into law, eliciting shock waves through the political world. The bill bounced between the House of Representatives and Senate, with the final amended version passing in the H.R. by a 220-207 vote.
While the act entails many changes in the relationship between private companies and the federal government, its main goal is to address inflation and the impact it has had on every household nationwide, while simultaneously lowering healthcare and energy costs.
The senate democrats highlight the following goals of the Inflation Reduction Act: expanding Medicare benefits, investing in eco-sustainability, creating manufacturing jobs, investing in disadvantaged communities, enforcing certain taxes on corporations, and protecting families/ small businesses making under $400,000 annually.
To reduce inflation, both houses of Congress and the executive branch agreed that the government will attempt to close the gap between how much money they spend and the income they make from revenues and taxes, also known as the federal deficit.
Many debate how productive the bill will be at closing this gap. Some experts argue that the act will not do much to cap inflation costs and that it will stimulate government spending. However, the Congressional Budget Office (CBO) released that the act would reduce the federal deficit by $305 billion as early as 2031. The effects of the legislation are being widely disputed amongst politicians and economists alike.
The bill entails that the IRS hire 87,000 new workers. According to government document IN11977, the IRA would be giving the IRS $45.6 billion to enforce tax laws. They would receive $25.3 billion for routine operation costs, $3.2 billion to cover taxpayer services, $4.8 billion for the Business Systems Modernization Project, and $557.5 million would be handed over to treasury offices to oversee the correct spending of this money within the IRS. Supporters of the bill will argue that investing in the IRS will result in an increase in tax revenue since they will have the technology and reach to cover more cases and investigate.
Another point of this act is to promote and increase the supply of goods related to renewable energy since having more supply than demand could potentially lower costs. An added benefit covered by this revision is that the government is clearly committed to the environment’s safety and protection.
The legislation includes a $369 billion package to invest in the environmental safety of the planet. NPR states that this money is meant to help reduce greenhouse emissions (specifically reducing 40 percent of carbon emissions by 2030), invest in clean energy technologies, and extend subsidies for the Affordable Care Act (enacted in 2010 to stimulate health insurance).
One of the sections of the Inflation Reduction Act that has received much emphasis and public attention is the new revenue (estimated at around $300 billion) that the government would receive by implementing a minimum 15 percent tax on corporations.
Another focus of the bill is capping the prices of health necessities that notoriously hallmark the American healthcare system. With the bill’s passing, the plan to improve healthcare will continue to be implemented gradually until 2029. By 2023, the following drug provisions will be enacted: drug companies will have to pay rebates if drug prices rise faster than inflation, insulin copays will be limited to $35 per month (for Medicare Part D ), and costs of vaccines will be reduced by providing better coverage (in Medicare Part D, Medicaid & CHIP). The federal government will negotiate prices with high-cost drugs covered by Medicaid.
Those against the Inflation Reduction Act argue that the bill spends a lot of money, will do little for the economy, and is simply inefficient. The new laws imposed on corporations are said to discourage business since it will tax manufacturers, leading business owners to look for some place else to move their store. Some will also claim that lowering pharmaceutical prices disrupts the capitalist market and will negatively harm the economy.
The Inflation Reduction Act is a historic legislation that characterizes the wave of progressive movements sweeping the nation, as well as the ever-growing concern for the safety and security of the planet.