What is in the Inflation Reduction Law?

The $740 billion package is made up of health care, climate change and deficit reduction strategies, hoping to tackle inflation and reduce deficits.

WASHINGTON — It’s nowhere near the $4 trillion proposal President Joe Biden first launched to rebuild America’s public infrastructure and family support systems, but the health care compromise package to fight inflation, the climate change and deficit reduction strategies appear to be on their way to a Senate vote this weekend.

The estimated $740 billion proposal, put forward by two top negotiators, Senate Majority Leader Chuck Schumer and a reluctant Sen. Joe Manchin, the conservative Democrat from West Virginia, includes some of the party’s priorities for which fought a lot. But the final touches came this week from Sen. Kyrsten Sinema, D-Arizona, who put her work in the final revisions.

What’s in and out of the Democrats’ “Inflation Reduction Act of 2022” as it stands now:


Launching a long-sought goal, the bill would allow the Medicare program to negotiate prescription drug prices with pharmaceutical companies, saving the federal government an estimated $288 billion over the 10-year budget window.

That new revenue would be invested in lower costs for seniors on medications, including a $2,000 out-of-pocket limit for seniors who fill prescriptions at pharmacies.

The money would also be used to provide free vaccines to seniors, who are now among the few not guaranteed free access, according to a summary document.


The bill would extend subsidies provided during the COVID-19 pandemic to help some Americans who buy health insurance on their own.

Under the previous pandemic relief, the extra help was due to expire this year. But the bill would allow the assistance to continue for three more years, lowering insurance premiums for people who buy their own health care policies.


The bill would invest nearly $374 billion over the decade in strategies to combat climate change, including investments in renewable energy production and tax rebates for consumers to buy new or used electric vehicles.

It is broken down to include $60 billion for a tax credit for clean energy production and $30 billion for a tax credit for wind and solar energy production, seen as ways to boost and support industries that can help curb the country’s dependence on fossil fuels. The bill also provides tax credits for nuclear power and carbon capture technology that oil companies like Exxon Mobil have spent millions of dollars advancing.

The bill would impose a new fee on excess methane emissions from oil and gas drilling, while giving fossil fuel companies access to more leases on federal land and waters.

A late addition pushed by Sinema 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 on which nearly 40 million Americans depend. to obtain drinking water.

For consumers, there are tax breaks as incentives to go green. One is a 10-year consumer tax credit for renewable energy investments in wind and solar power. There are tax breaks for the purchase of electric vehicles, including a tax credit of $4,000 for the purchase of used electric vehicles and $7,500 for new ones.

In all, Democrats believe the strategy could put the country on track to reduce greenhouse gas emissions by 40% by 2030, and would “represent the largest climate investment in US history, by far.”


The bill’s biggest revenue-raiser is a new 15% minimum tax on corporations making more than $1 billion in annual profits.

It’s a way to clamp down on some 200 US companies that avoid paying the standard 21% corporate tax rate, including some that end up paying no tax at all.

The new corporate minimum tax would take effect after fiscal year 2022 and raise some $258 billion over the decade.

Revenue would have been $313bn, but Sinema insisted on a change to the 15% corporate minimum, allowing a deduction for depreciation used by manufacturing industries. That cuts about $55 billion from total revenue.

Money is also raised by encouraging the IRS to prosecute tax fraud. The bill proposes an $80 billion investment in taxpayer services, enforcement and modernization, which is projected to raise $203 billion in new revenue, a net gain of $124 billion over the decade.

The bill sticks to Biden’s original promise not to raise taxes on families or businesses making less than $400,000 a year.

Lower drug prices for seniors are paid for with savings from Medicare negotiations with drug companies.


To win over Sinema, Democrats abandoned plans to close a tax loophole the wealthiest Americans have long enjoyed: so-called “earned interest,” which under current law taxes wealthy hedge fund managers and others at a 20% rate.

The left has for years sought to raise the accrued interest tax rate, raised to 37% in the original bill, more in line with higher income earners. Sinema would not allow it.

Keeping the wealthy tax free deprives the party of $14 billion in revenue it was counting on to help pay for the package.

Instead, the Democrats, with Sinema’s approval, will impose a 1% excise tax on share buybacks, raising some $74 billion over the decade.


With some $740 billion in new revenue and about $433 billion in new investment, the bill promises to put the difference toward deficit reduction.

Federal deficits skyrocketed during the COVID-19 pandemic as federal spending soared and tax revenues fell as the nation’s economy thrashed through shutdowns, office closings and other massive changes.

The nation has seen deficits rise and fall in recent years. But the federal budget overall is on an unsustainable path, according to the Congressional Budget Office, which released a new report this week on long-term projections.


This latest package, after 18 months of on-and-off negotiations, leaves behind many of Biden’s more ambitious goals.

While Congress passed a bipartisan $1 trillion infrastructure bill for roads, broadband and other investments that Biden signed into law last year, the president’s and the party’s other key priorities have gone up in smoke.

Among them is the continuation of a $300 monthly child tax credit that sent money directly to families during the pandemic and is believed to have vastly reduced child poverty.

Also gone, for now, are free pre-kindergarten and community college plans, 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 critical needs.

Associated Press writer Matthew Daly contributed to this report.

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