On August 16, President Biden signed the Inflation Reduction Act of 2022 into law.
This bill aims to fight climate change, tax wealthy corporations, make health care and prescription drugs affordable, and find more funding for the IRS.
Even though President Biden has signed this bill, some savings in the bill aren’t set to kick in for a while. For example, lower drug prices, including caps on their costs for seniors, won’t be available until 2025.
Some pivotal items in this legislation include:
- A 15% corporate minimum tax rate: Corporations with at least $1 billion in income will have a new tax rate of 15%. Taxes on individuals will not be increased, but stock buybacks by corporations will have a 1% excise tax.
- Prescription drug price reform: Beginning in 2025, Medicare will be allowed to negotiate the price of certain prescription drugs, bringing down the price people will pay for their meds. Medicare receivers will also have a $2,000 cap on annual out-of-pocket prescription drug costs.
- IRS tax enforcement: For several years the IRS has said they are understaffed and funded poorly, making it impossible to operate at full capacity.The bill invests $80 billion in the IRS over the next 10 years, which will allow them to upgrade their systems and adequately staff their offices to help resolve taxpayer issues.
- The IRS commissioner has pledged not to use the extra funding to audit small business or lower income taxpayers who earn less than $400,000.
- Affordable Care Act (ACA) subsidy extension: Currently, medical insurance premiums under the ACA are subsidized by the federal government to lower premiums. These subsidies, which were scheduled to expire at the end of this year, will be extended through 2025.
- Energy security and climate change investments: The bill is heavily invested in climate protection, including tax credits for households to offset energy costs, investments in clean energy production, and tax credits aimed at reducing carbon emissions.
By signing this bill into law, President Biden hopes the Inflation Reduction Act will help tackle the climate crisis, greatly benefit the lower classes, and support American workers by creating well paying union jobs across the country.