The US Senate passed the Inflation Reduction Act, successor to the House-passed Build Back Better Act of late 2021, which is touted to help reduce the country’s crippling inflation, among many other benefits. A 755-page version of the measure that had been in talks for months cleared the Senate on Sunday and will shortly be put to the vote in the House, where it is anticipated to pass.
According to the White House, the nearly $700 billion program would combat inflation in two important ways: by reducing household energy and healthcare prices and by assisting in reducing the deficit. The legislation is referred to as “Inflation Reduction” because it aims to cut the deficit by taxing the richest businesses and cutting the price of prescription medications. It is comprehensive legislation to fight climate change at the same time. The United States should significantly cut its greenhouse gas emissions by the end of the decade, provided that no subsequent Congress or President comes along to repeal these rules.
According to the Congressional Budget Office’s (CBO) assessment, the proposal will result in $305 billion in deficit reduction through 2031, including over $100 billion in net scoreable savings and an additional $200 billion in gross income through improved tax compliance. In addition, the CBO estimates that the legislation would modestly cut net expenditure by about $15 billion through 2031, including by almost $40 billion in 2031, since the savings from prescription drugs would be greater than the increase in spending.
Expanded energy and climate tax credits would almost match the level of new tax hikes under the plan, which would also result in a tiny net tax reduction of around $2 billion a year once fully phased in. Over a ten-year period, the legislation would bring in nearly $300 billion in net revenue, primarily from increased tax compliance and the knock-on effects of higher wages due to lower health premiums — neither of which are tax increases — as well as early revenue collection as businesses retime some payments.
In an official statement, President Joe Biden states, “Today, Senate Democrats sided with American families over special interests, voting to lower the cost of prescription drugs, health insurance, and everyday energy costs and reduce the deficit while making the wealthiest corporations finally pay their fair share. I ran for President promising to make government work for working families again, which is what this bill does — period.”