President Joe Biden on Tuesday signed into law the Inflation Reduction Act — the Democrats’ big economic package aimed at addressing climate change, capping drug costs and raising hundreds of billions of dollars through taxes on corporations.
At a White House ceremony, Biden called the law — which no Republicans voted for — a measure “not just about today. It’s about tomorrow.”
Here’s a guide to key components of the sprawling legislation, as reported by MarketWatch journalists.
Energy and climate: The law contains a number of consumer-focused rebates and tax credits that could directly impact Americans’ wallets.
Here, for example, is how the IRA’s rebates and credits for heat pumps and solar can lower your energy bill.
And if you’re thinking about buying an electric vehicle
the IRA includes the first-ever credit for used EVs, as well as a $7,500 credit for new EVs.
Read more: Climate portion of IRA would keep U.S. ‘within striking distance’ of halving emissions by 2030
The measure is seen as a major effort toward increasing access to EVs across income levels and using them for multiple purposes. Here’s how to navigate the tight market for pre-owned electric vehicles like the Nissan
Leaf and Chevy
Healthcare: Medicare will be allowed to negotiate the costs of some prescription drugs
with pharmaceutical companies, which could dramatically reduce how much seniors have to spend on medications.
Chief executives of pharmaceutical companies, meanwhile, have told investors that the changes would be “chilling” or “detrimental” to the development of new therapies.
Now read: Drug savings in new law aren’t just for seniors
The IRA caps out-of-pocket drug costs for Medicare beneficiaries at $2,000 a year, beginning in 2025. It also imposes a $35-a-month cap on insulin purchased through Medicare — but that cap doesn’t extend to patients on private insurance.
Opinion: No, Senate inflation bill isn’t stripping $300 billion from Medicare
The law Biden signed will also spare 13 million people who get federal subsidies under the Affordable Care Act from higher health-insurance premiums next year. Those subsidies will now be extended for three years.
Taxes: There are two big corporate tax elements of the package: a 15% corporate minimum tax aimed at companies like Amazon
that pay little or no income taxes and a 1% excise tax on stock
The 1% tax on share buybacks is seen as unlikely to dull the appeal of share repurchases by many large companies, while other results may be tougher to see, like the potential bottom-line drag from the new minimum 15% corporate tax rate.
analysts have said the minimum tax and buybacks would decrease S&P earnings per share by 1.5% on the whole, but the declines could be deeper in sectors such as healthcare
and information technology.
The Internal Revenue Service will receive $80 billion in new funding over a decade. But some tax experts have wondered how far the money will go toward making a difference at the backlogged and beleaguered agency.
In a late twist as the bill was being voted on in the Senate, private-equity firms escaped facing tens of billions of dollars in potential tax increases and instead walked away with relief from the new 15% corporate minimum tax.
There are no changes to the $10,000 cap on state and local tax deductions.
Inflation and deficits: Whether the law will live up to its name is a subject of fierce debate. In an analysis released Friday, the Penn Wharton Budget Model found the measure would reduce deficits by $264 billion over a decade. The same study concluded that the impact on inflation is “statistically indistinguishable from zero.”
Others, including former Treasury Secretary Larry Summers, see the IRA doing its job.
“The tendency of this bill will be to reduce inflation, because over time it reduces demand by bringing down budget deficits,” Summers, critical through much of the past year of his fellow Democrats’ approach to arresting inflationary pressures. told the Harvard Gazette.
With contributions by Brett Arends, Rachel Koning Beals, Steve Gelsi, Jessica Hall, Andrew Keshner, Eleanor Laise, Jaimy Lee, Chris Matthews, Nicole Lyn Pesce, Victor Reklaitis and Joy Wiltermuth.