Great news! President Joe Biden signed the Inflation Reduction Act into law on August 16, 2022. According to the Biden Administration, the bill will focus on the following four points:
- Making healthcare more affordable;
- Combating climate change and reducing energy costs for millions of households; and
- Raising taxes on corporations by imposing a 15% mandatory tax rate on multi-billion dollar companies.
- Creating economic opportunities and jobs.
We understand that the bill is very complex, which is why we created this article to explain how this bill could impact you and your family.
Next, I am going to answer the following questions:
- What is the Inflation Reduction Act of 2022?
- How will this bill reduce inflation?
- How soon will inflation decline because of this bill?
- What impacts will this bill have on me and my family?
- Am I going to see an increase in my taxes?
- Where can I find more information about the Inflation Reduction Act?
What is the Inflation Reduction Act of 2022?
The Inflation Reduction Act is a slimmed-down version of the Build Back Better bill, which aimed to make historic investments in the nation’s social safety net. A social safety net is intended to protect and improve the lives of a country’s vulnerable families and individuals.
This new bill, the Inflation Reduction Act (IRA), makes the largest investment in U.S. history into combating climate change, lowers the cost of prescription drugs, and raises taxes on corporations.
How will this bill bring down inflation?
There are three main ways the bill targets rising prices.
- First, it will allow Medicare to negotiate the price of certain prescription drugs, reducing the price consumers will pay for their medications.
- Second, the bill will promote the production of certain goods, mainly renewable energy. The goal is to have more supply than demand which could lower costs over time.
- Finally, the bill plans to reduce the federal deficit, which is the difference between how much the U.S. government spends and how much it makes in taxes and revenue.
Unfortunately, the bill fails to address some of the biggest concerns for families in the U.S., such as the increasing cost of food, fuel, and housing. Many experts also believe that the bill will not have a major effect on inflation in the next few months or even years.
What impacts will this bill have on me?
Although experts do not see inflation dramatically decreasing anytime soon because of this bill, they expect to see a range of measures to help with high costs. A few examples include:
Crushing healthcare costs
The IRA will put a $2,000 annual cap on out-of-pocket prescription drugs for people insured by Medicare. This is great news for senior citizens and families who depend on marketplace healthcare. It is also expected to cut health insurance costs by an average of $800 a year for the 13 million people who buy individual coverage through the Affordable Care Act (ACA) and expand health insurance coverage for Latino families.
Combating climate change
This bill includes the largest-ever investments in climate change mitigation efforts and clean energy production. In 2023, rebates and tax credits will be available to those who switch to cleaner energy sources, including electric cars and rooftop solar panels. For example, a $4,000 tax credit will be offered for low- and middle-income drivers to buy a used electric vehicle and up to $7,500 for a new electric car.
Creating jobs and economic growth
According to the White House, this bill will create good-paying union jobs through clean energy tax credits. Companies will receive this tax credit if they employ people and generate economic growth in communities that previously relied upon the extraction, processing, transport, or storage of coal, oil, or natural gas. The bill also incentivizes American-made manufacturing, which will generate clean energy and electric vehicles in the U.S. and well-paying jobs throughout the country.
Am I going to see an increase in my taxes?
According to the White House, no one making under $400,000 per year will pay a penny more in taxes. Instead, the tax increases will largely fall on corporations because of the 15% minimum tax for companies who earn $1 billion or more. This new corporate tax is expected to generate $313 billion in tax revenue.
Where can I find more information about the Inflation Reduction Act?
For more information on what other changes you can expect to see because of the Inflation Reduction Act, please visit the Official White House website by clicking here.