Bill’s By The Number$

Posted by: Lisa Navarro | Posted on: August 15th, 2022 | 0 Comments

STARTED OFF REALLY BIG – The legislative journey of the “Inflation Reduction Act of 2022” (IRA) started with Bernie Sanders (I-VT). In June 2021, Sanders pushed for a 10-year social spending package projected to include $6 trillion of outlays over a decade-long period. His proposal followed the American Rescue Plan Act (HR # 1319), a $1.9 trillion spending bill signed into law by President Biden on 3/11/2021 (source: Congress).

REDUCED IN SIZE – Within 2 months (by August 2021), the original $6 trillion spending idea was trimmed to $3.5 trillion and was called the “Build Back Better Act” (BBB). The 2,465 page bill would impact federal income taxes, education, social welfare, climate change and foreign policy (source: Congress).

GETTING EVEN SMALLER – Senator Joe Manchin (D-WV) effectively shut down the $3.5 trillion proposed structure when he drew a “line-in-the-sand” at $1.5 trillion as the maximum 10-year spending size that he could support. A 9/06/2021 New York Times article described the $3.5 trillion BBB proposal as a “cradle to grave” expansion of the US social welfare safety net (source: New York Times).

HOW ABOUT NOW? – Recognizing that BBB (HR # 5376) was stalled in Congress, House Speaker Nancy Pelosi (D-CA) forced her members to “make tighter decisions.” The result: a slimmer 2,135 page document scored at $1.75 trillion over 10-years that kept electric vehicle subsidies, free pre-K education and a corporate minimum tax, but eliminated paid leave, free community college and an expansion of Medicare (source: Congress).

PASSED IN ONE CHAMBER – The House passed BBB on 11/19/2021 (220-213 vote) in spite of House Minority Leader Kevin McCarthy’s 8-hour speech, protesting that the legislation would send the country into an economic tailspin. However, the $1.75 trillion BBB bill stalled in the Senate, never coming to a vote (source: Congress).

IT’S BACK – To the surprise of many in Washington, HR # 5376 resurfaced on 7/27/2022, the result of closed-door negotiations between Senate Majority Leader Chuck Schumer (D-NY) and Senator Joe Manchin (D-WV). The newly named “Inflation Reduction Act of 2022” (IRA) included $433 billion of spending, offset by $739 billion of new revenue raised through a 15% corporate minimum tax, prescription drug pricing reform, increased IRS tax enforcement and the elimination of “carried interest” taxation paid by hedge fund managers (source: Senate).

THE VERY LAST VOTE – Kyrsten Sinema (D-AZ), the one Senate holdout preventing the passage of IRA, secured 3 changes to the bill. Sinema eliminated the “carried interest” taxation used by investment managers (worth $14 billion), added a modification to the 15% minimum tax on large corporations that stopped the removal of accelerated depreciation (worth $55 billion) and added $4 billion for “drought relief” (source: Senate).

PASSED THE SENATE – Senate Democrats survived a grueling 27-hour session before passing the 755-page “Inflation Reduction Act of 2022” (HR # 5376) on a party-line vote on Sunday 8/07/2022 (source: Senate).

CLIMATE – IRA injects $369 billion over the next decade into climate and energy programs, spending that is forecasted to reduce US greenhouse gas emissions by 42% below our 2005 levels by 2030 (source: Senate).

EV – IRA includes a $7,500 tax credit for the purchase of a new electric vehicle (EV) and a $4,000 credit for the purchase of a used EV. The credits are limited to purchases of cars costing no more than $55,000 and trucks maxed out at $80,000, and the batteries must contain minerals from a short list of countries (source: Senate).

CORPORATE MINIMUM TAX – IRA is expected to raise $258 billion over the next decade via a 15% minimum tax on the 150 US companies that have annual profits of at least $1 billion (source: Joint Comm. on Taxation).

PRESCRIPTION DRUGS – IRA will allow Medicare to negotiate directly with drug companies for lower prices on 10 prescription drugs beginning in 2026, including inflation caps for the drugs it purchases. These changes have been scored to produce $288 billion of savings over the next decade (source: Senate).

MORE AUDITS – IRA includes $80 billion in the next decade for the IRS, money that will be used to hire 87,000 new IRS employees by the year 2031, increase enforcement efforts, and upgrade the agency’s technology and its taxpayer services. The $80 billion cost is projected to result in $124 billion of new tax revenue (source: Senate).

INSURANCE – In health insurance, IRA extends for 3-years the premium subsidies introduced by the 2010 Affordable Care Act at a cost of $64 billion over the next 10 years for 13 million insureds (source: Senate).

BECOMING LAW – The House of Representatives returned to Washington on Friday 8/12/2022 and passed the “Inflation Reduction Act of 2022,” sending the climate, healthcare and tax bill onto President Joe Biden for his signature. HR # 5376 is projected to reduce our deficit by $294 billion over the next 10 years (source: House).