September 01, 2022

The Inflation Reduction Act voted on by House

The Inflation Reduction Act voted on by House

By: Sydney Sheffield 

The House recently passed the Inflation Reduction Act, sending the legislation to the desk of President Joe Biden. The Act aims to lower healthcare costs, combat climate change, raise taxes on some large companies, and reduce the deficit.

This is considered a major win for climate change, aiming to put the country on a path to reduce greenhouse gases by 40% below levels in the year 2005, by 2030. The bill also includes $370 billion in climate and energy provisions that will transform how Americans get their energy and shape the country’s climate and industrial policy for decades. “It will kick start the era of affordable clean energy in America. It’s a game changer, it’s a turning point, and it’s been a long time coming,” said Senate Majority Leader Chuck Schumer. 

While the bill is titled the Inflation Reduction Act, some speculate it might not lower inflation. The University of Pennsylvania’s Penn Wharton Budget Model found that while it would reduce non-interest cumulative deficits by $264 billion over the budget window, the impact on inflation is statistically indistinguishable from zero. “The Act would have no meaningful effect on inflation in the near term but would reduce inflation by around 0.1 percentage points by the middle of the first decade,” the model found. 

The Inflation Reduction Act will invest $64 billion into the Affordable Care Act (ACA) extension, to reduce the cost for many seniors as well as federal spending on its prescription drug plan. Starting in 2024, out-of-pocket costs are capped at $4,000 for those who participate in Medicare Part D and will decrease to $2,000 by 2025. The average enrollee saves $800 per year in the ACA marketplace, allows Medicare to negotiate 100 drugs over the next decade, and requires drug companies to rebate back price increases higher than inflation. Other benefits for Medicare participants include free vaccines and $35 per-month insulin in 2023. 

“This bill will save Medicare hundreds of billions of dollars and give seniors peace of mind knowing there is an annual limit on what they must pay out-of-pocket for medications, said Jo Ann Jenkins, American Association of Retired Persons (AARP) CEO. “Lowering prescription drug prices is a top priority for Americans, with more than 80% of people across both political parties supporting the measure. We thank all the senators who voted today to lower drug prices.” 

Other goals of the legislation include:

  • Lowering energy bills by $500 to $1,000 per year
  • Creating manufacturing jobs through a $60 billion investment
  • Investing in the disadvantaged communities by cleaning up pollution and taking steps to reduce environmental injustice through a $60 billion investment
  • Closing tax loopholes used by the wealthy through a 15% corporate minimum tax, 1% fee on stock buybacks, and enhanced the Internal Revenue Service (IRS) enforcement
  • Protecting families and small businesses making less than $400,000 a year 

Read the full text here