The U.S. Senate passed H.R. 5376, more commonly known as the Inflation Reduction Act (previously known as the Build Back Better Act and the 2022 Budget Reconciliation Bill), by a vote of 51-50 Sunday with Vice President Kamala Harris casting the deciding vote. The bill now moves to the U.S. House of Representatives for consideration. This is a massive bill – 2140 pages. It has some promising provisions and some not so good provisions.
The Indiana Chamber actively opposed some provisions of the bill. Specifically, we opposed the provisions in the legislation relating to taxes that will likely discourage investment and undermine economic growth and price controls that will limit American innovation. In addition, we believe that the bill will have little impact on inflation.
So, what will this bill do if it passes out of the House? Some of the key provisions of the bill deal with:
Climate change – More than $300 billion would be invested in energy and climate reform, the largest federal clean energy investment in U.S. history. This portion of the bill takes on transportation and electricity generation, and it includes $60 billion for growing renewable energy infrastructure in manufacturing. It also includes several tax credits for individuals on things like electric vehicles and making homes more energy efficient.
Prescription drugs costs – The bill includes a measure that allows the federal health secretary to negotiate the prices of certain drugs each year for Medicare. This won’t impact every prescription drug or every patient, and it won’t take effect immediately. The negotiations will take effect for 10 drugs covered by Medicare in 2026, increasing to 20 drugs in 2029. The bill puts a cap of $2,000 on out-of-pocket prescription drug costs for people on Medicare, effective in 2025. There’s also a three-year extension on healthcare subsidies in the Affordable Care Act originally passed in a pandemic relief bill last year, estimated by the government to have kept premiums at $10 per month or lower for the vast majority of people covered through the federal health insurance exchange.
Tax reform – The legislation creates a 15% minimum tax for corporations making $1 billion or more in income with an estimated impact of more than $300 billion. A 1% excise tax on stock buybacks was introduced that takes effect next year. The package also calls for providing more funding to the IRS for tax enforcement, which would raise $124 billion.
Even though the Chamber has some concerns about the tax impacts of the bill, the version that passed the Senate on Sunday is a much-improved version of bill over where it started. The fact that it was a 51-50 vote, along party lines, doesn’t leave any room for the House to make adjustments if they want to pass the legislation. The bill will either pass very quickly (likely this week) or die under its own weight. The impacts on Chamber members will vary according to your size and sector – some benefitting and some most likely needing to pass increased costs onto their customers. We will keep you informed as things proceed – stay tuned!
For more information on the pending bill, review the following links:
https://www.congress.gov/bill/117th-congress/house-bill/5376/text
https://s3.documentcloud.org/documents/22128080/inflation-reduction-act-of-2022.pdf
https://www.cnn.com/2022/07/15/politics/biden-build-back-better-manchin/index.html
