What you need to know about the Inflation Reduction Act of 2022

On Sunday, August 8, 2022, the Senate passed bill HR 5376, the Inflation Act of 2022, a climate change, health care and tax package. The Senate vote passed along partisan lines by a narrow margin of 51 to 50. It saw 50 Republican senators against the bill and was passed with the support of all 48 Democratic senators, and two independents, and the tie was broken by vice presidents. President Kamala Harris.

What is the Inflation Reduction Act of 2022?

Democrats and supporters of the legislation say it would lower health care, prescription drug and energy costs, invest in energy security and make U.S. tax law fairer, while also fighting inflation and reducing the deficit.

However, proponents argue that the new spending would further exacerbate inflation and choke growth.

Some of the measures are:

More than $300 billion invested in energy and climate reform: This is the largest federal investment in clean energy in US history, originally soliciting a whopping $555 billion in investment. The budget has planned approximately $60 billion to develop renewable energy infrastructure through the production of solar panels and wind turbines. In addition, it offers incentives through tax credits for individuals with electric vehicles and energy-efficient homes. Democrats say these measures will help cut greenhouse gas emissions by 40%.

Reducing the cost of prescription drugs: This measure aims to make prescription drugs more affordable, allowing the federal secretary of health to negotiate the prices of certain expensive Medicare medications each year. The bill puts a $2,000 cap on out-of-pocket costs for prescription drugs for people taking Medicare, effective in 2025, along with a three-year extension of health care subsidies in the Affordable Care Act (ACA).

Tax reform: The tax-related portion of the bill seeks to introduce a 15% minimum tax for businesses that generate $1 billion or more in revenue, which is expected to bring more than $300 billion in tax revenue to the federal government while eliminating tax loopholes . The law also aims to boost tax enforcement by proposing $80 billion in additional funding to the Internal Revenue Service (IRS) over the next decade.

The bill received approval from John Arensmeyer, CEO of Small Business Majority. “The legislation includes measures that small businesses across the country have been calling for for nearly a year. Most importantly, the legislation will extend the Affordable Care Act’s premium subsidies through 2025 and lower the prices of prescription drugs. More than half of all participants in the healthcare market are small business owners, employees or self-employed entrepreneurs. Access to affordable, quality health care is critical to them because they have historically been a disproportionate share of the working uninsured population and current health services hurt small business profits,” Arensmeyer said in a statement.

Why are others on the fence?

Despite praise for the bill, it has not been without criticism. Republicans argue that the bill won’t tackle inflation, could destroy jobs and undermine growth if the economy threatens to slide into recession.

Senator Joe Manchin argues that the bill would put more pressure on business because it would raise taxes on Americans earning less than $400,000. The argument here is that despite Democrats’ assurances that it would not affect Americans with annual incomes less than $400,000, the ripple effect of additional taxes levied on corporations will eventually affect them.

The sentiment is also shared by the National Restaurant Association, which says the bill is likely to increase the prices of restaurants’ supply chains, the costs of which are inadvertently passed on to local restaurants, fueling inflation.

“Passing this bill is likely to increase supply costs for restaurants that are already struggling to weather the economic storms. For restaurants hoping for a pandemic lifeline from Washington, this bill falls very short,” said Sean Kennedy, executive vice president for Public Affairs at the National Restaurant Association.

He cited the Joint Taxation Committee’s report that manufacturers and wholesalers will be responsible for paying 59% of the $313 billion. This is likely to affect manufacturers and producers of poultry, meat, frozen foods, soft drinks and alcohol, as well as their distribution partners, all of whom directly or indirectly supply products to the country’s restaurants. These partners will likely have to pass on many of these costs to restaurant owners.

The bill now goes to the House of Representatives, where it will be voted on Friday. If it gets through there, it will go to President Joe Biden, who will sign it into law.

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