Breaking a year-long deadlock, Democrats in the U.S. Senate came to terms on major piece of legislation that will make major investments in clean energy, lower drug prices for Medicare enrollees, and end the scandal of highly profitable billion-dollar companies paying no federal income tax.
It passed 50-50 on strict partisan lines Aug. 7, with Democratic Vice President Kamala Harris casting the tie-breaking vote. It then passed the House Aug. 12 by 220-213, again on party lines, with Jared Golden of Maine the only Democrat in opposition.
The bill, HB 5376, started last September as the Build Back Better Act, but was renamed the Inflation Reduction Act at the request of Democratic Senator Joe Manchin of West Virginia.
After it’s signed into law as expected:
- Medicare will be able to directly negotiate the cost of prescription drugs, for the first time since George W. Bush got a prescription drug benefit added to Medicare in 2003. However the negotiations won’t start until 2026, and will target just 10 of the 50 most expensive drugs.
- Tax credits will subsidize investments aimed at addressing climate change, including $10 billion to build electric vehicles, solar panels and wind turbines; $9 billion for energy-efficient home retrofits for low-income Americans; and $7,500 tax rebates for consumers to buy electric vehicles.
- Medicare will phase in a $2,000 a year limit on out-of-pocket drug expenses.
- The expanded subsidies for exchange-bought health coverage that passed in an earlier pandemic relief bill will be extended by another three years.
- Companies that report over $1 billion in profits will face a new 15% corporate minimum tax. [Astonishingly many big companies pay little or nothing today. The new provisions will now counteract loopholes that make that possible.]
- The IRS, long underfunded, will get a $80 billion budget bump, enabling it to crack down on wealthy tax cheats.
- Company stock buybacks, a gimmick meant to goose stock prices (which is illegal in Europe) will for the first time face a tax penalty.
U.S. Senator Jeff Merkley (D-Oregon) was also able to get favorable terms for union workers in the way some of the green jobs subsidies are set up: Projects are eligible for up to five times as much tax credit if they’re built with union labor and give opportunities for apprentices.
As a concession in exchange for Manchin’s support for the bill, Democrats also committed to pass separate legislation that would limit delays in permitting energy projects such as natural gas pipelines.
The bill’s backers predict the bill’s investments and subsidies will end up lowering greenhouse gas emission to 40% below 2005 levels by the end of the decade. Backers also say the more than 100 climate, energy, and environmental programs included in the bill will lead to the creation of 1.5 million jobs.
National AFL-CIO president Liz Shuler applauded the bill’s passage, saying it will deliver real help to working families.
“Enacting clean energy tax incentives with labor standards and domestic content requirements will create good-paying jobs in construction and manufacturing right here in America,” Shuler said in a press statement. “And this legislation will address long overdue changes to our tax system that will finally make the most profitable corporations pay their fair share.”
