January 30, 2023

It turns out that the agenda of the Democrats in Congress was so Most of them just died.

The surprise deal that Senator Joe Manchin (D-WV) announced last month has now, finally, passed the Senate, and appears likely to pass the House later in August. It’s much smaller than the grandiose dreams Democrats dreamed of when President Joe Biden took office in 2021. But the bill, the Inflation Reduction Act, still achieves a lot. It contains historic provisions for tackling climate change and takes steps toward a longstanding democratic policy goal: to allow Medicare to negotiate prices for some prescription drugs.

The bill can affect the type of car you buy and how your home is heated. It will prevent significant price increases this year for some people who buy individual health insurance. And if you don’t pay your taxes, there’s a better chance the IRS will find out.

Here’s what’s on the bill and what that will mean for American life in the years to come.

Biggest Climate Change Effort – Ever

The Inflation Reduction Act would be the largest thing the United States has ever done to tackle climate change, and climate accounts for the largest share of the bill’s spending: nearly $370 billion.

This is smaller than the House version from last fall, and a fraction of what Biden originally envisioned for the climate. Senate Democrats claim that these investments would be enough to cut climate pollution by nearly 40%. (This is a little less dramatic than it sounds; the decline has been compared to levels in 2005, when emissions peaked. Even without a new policy, the US was still on track to cut 20 percent of emissions by 2030.)

The policies are generally intended to move American consumers and industry away from dependence on fossil fuels. The bulk of the funding goes to tax credits and cuts to a range of renewable technologies — solar panels, wind turbines, heat pumps, energy efficiency, and electric vehicles. It includes incentives for companies to manufacture more of that technology in the United States. The bill would also invest in energy efficiency at industrial sites that could help reduce the sector’s huge carbon footprint, while allocating some money to forest and coastal restoration.

The bill, if enacted, would break new ground in other problematic areas of the climate crisis. It sets out the first methane tariffs that penalize fossil fuel companies for excess emissions of particularly strong climate pollutants. Another large portion of the funding helps disadvantaged communities with monitoring and cleanup pollution, and build their resilience in the face of climate impacts.

Besides reducing climate pollution, investments in clean energy can bring about a reduction in inflation. According to Robbie Orvis, senior director at Energy Innovation, higher energy prices accounted for nearly a third of the 9 percent rise in overall CPI last year. By helping Americans become less dependent on fossil fuels, the spending helps alleviate the global oil crisis and lower consumer bills.

Helping people afford health insurance for longer

The climate parts of the bill have received the most attention. But the bill also includes some important steps in health care, including support for the expansion of the Affordable Care Act.

One of Obamacare’s ways to expand health care coverage was to create markets for people to buy insurance and provide federal benefits to help low- and middle-income families afford it. Families that make up up to 400 percent of the federal poverty line — about $106,000 for a family of four — can get federal assistance to pay their premiums. After that, they were on their own.

But in 2021, Congress eliminated those caps, instead saying that no family would have to pay more than 8.5% of their income for health insurance. The change had the greatest impact on people making between 400 and 600 percent of the federal poverty line (for the same family of four, that could be up to $159,000 a year). As Vox’s Dylan Scott previously reported, the changes also enabled nearly 7 million people to qualify for free health insurance under the ACA.

However, those policies were due to expire at the end of this year, leaving millions of people facing much higher healthcare expenditures in the future. The Inflation Reduction Act extends these subsidies for three years until the end of 2025, ensuring that people do not face this rise for a while. This extension is expected to cost $64 billion, according to estimates by the Congressional Budget Office.

Negotiate prescription drug prices

For years, Democrats have told voters that they would take policies that reduce the costs of prescription drugs, only to be banned by Republicans and powerless. This law allows them to finally fulfill that campaign promise by enabling Medicare to negotiate prescription drugs — a big change that could lead to significant cost reductions for a small subset of drugs.

As outlined in the bill, Medicare will be able to negotiate a handful of drugs, with these new prices taking effect in 2026. In 2026, Medicare will be able to process costs for just 10 drugs; Over time, that will go up to 20 drugs. The drugs in question will be determined based on a large number of criteria, including how expensive they are.

These negotiations are meant to save a lot of money on Medicare, as prices are currently set by the manufacturers.

Representative Elizabeth McDonough, whose approval was needed for Democrats to move forward with the reconciliation process, signed off on the Medicare portion of the bill, but eliminated a provision that would have lowered prescription costs for Americans on private insurance.

Because of this decision, drug companies will be required to issue rebates if they try to raise the price of the drug at a rate higher than inflation. But this requirement only applies to drug prices for Medicare beneficiaries, not to people currently covered by private insurance.

The parliamentarian was also hit else A clause that would cover out-of-pocket insulin costs at a rate of $35 per month for those with private insurance. Democrats were able to keep an insulin cap of $35 a month for those covered by Medicare.

More money for the IRS

In fact, raising taxes can be politically challenging. So Democrats are taking, in part, a different approach: getting people to pay more of the taxes they already owe. The Inflation Control Act agreement increases funding for the IRS so that it can enforce the law and prosecute unpaid taxes. Senate Democrats, drawing from Congressional Budget Office numbers, Estimation That by investing $80 billion in the IRS over a decade, you’d raise $203 billion. This was also part of a proposal made by the Biden administration in 2021.

tax authority estimated That from 2011 to 2013, the “tax gap” — the difference between what people pay in taxes and what they owe in taxes — totaled $441 billion each year, or about 16 percent of total tax liabilities in those years.

One 2019 paper By Natasha Sarin, now at the Treasury, and economist Larry Summers, the tax gap has been estimated at $7.5 trillion from 2020 to 2029, most of which belongs to the wealthy. They calculated that underreporting was five times higher among people earning more than $10 million annually compared to those earning less than $200,000. Senate Democrats say the money directed to the IRS will not be intended to raise taxes on anyone earning less than $400,000.

Closing a loophole to make companies pay more taxes

The agreement also includes a minimum tax of 15 percent on companies with profits over $1 billion. Senate Democrats note that while the current corporate tax rate is 21 percent, Dozens of major companiesAT&T, Amazon and ExxonMobil, including AT&T, pay much less than that. Originally, the appropriation was expected to be $313 billion, Although the addition of new sculptures to Winning a vote by Senator Kirsten Senema (Democrat from A to Z), which gives manufacturers and private equity firms more freedom when it comes to the new minimum tax rate. These changes are likely to reduce the revenue that this measure will generate.

There is also a 1 percent selective tax on corporate share buybacks, which Currently, you are not subject to any taxes at all. It is estimated that this excise tax will increase approximately $73 billion in revenue.

August 5th update, 12:30pm: This story has been updated to reflect changes in tax policy in the legislation.

August 6 update, 2:30 p.m.: This story has been updated to reflect the Parliament’s decision and how drug prices will be affected.

Update August 7th, 3:20 p.m.: This story has been updated to reflect the Senate’s passage of the Inflation Reduction Act.

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