The Inflation Reduction Act of 2022, H.R. 5376, is designed to reduce the deficit and lower inflation while investing in domestic energy production and lowering healthcare drug costs. It passed the Senate on Aug. 7, 2022, and is awaiting approval by the House of Representatives, which would set it up to be signed into law by President Biden. In essence, the legislation is a scaled-down version of the Build Back Better Act proposed by the Biden administration in 2021.
According to Senate Democrats, the proposed legislation would raise $725 billion, require total investments of $433 billion, and result in a deficit reduction of more than $292 billion. The bill allows Medicare to negotiate lower prescription drug prices and extends the expanded Affordable Care Act program for three years, through 2025.
Additionally, the agreement establishes policies designed to promote and support domestic energy and transmission projects. The goal: to lower costs for consumers and help the U.S. meet long-term emissions goals.
Share today's term with your network:
Why is 'Inflation Reduction Act of 2022'the Term of the Day?
Anna Rose Layden / Stringer / Getty Images
The Inflation Reduction Act of 2022, a scaled-down version of Build Back Better, passed the Senate over the weekend and now heads to the House, where it is also expected to pass before going to President Biden for his signature as soon as the end of this week. If it passed into law, the expansive bill could have wide-ranging impacts, from taxes to prescription drug prices, and ESG investing.
Some may be relieved to find that a number of more aggressive tax proposals under consideration didn’t make the current version of the Inflation Reduction Act. For example, some provisions that would have narrowed the carried interest loophole were removed. However, the bill does include a 1% excise tax on corporate stock buybacks, and some large businesses would have to pay a minimum corporate tax rate of 15%.
It could also have implications for ESG-related investments, with the bill expected to bring $433 billion in new spending—predominantly on clean energies, according to lawmakers. It would also expand related tax credits for purchases like electric vehicles and solar panels.