The Inflation Reduction Act: A Brief Overview of Potential New Legislation
On July 27, the legislative text of the Inflation Reduction Act (IRA) was made public. The enormous bill—clocking in at 725 pages—contains a wide range of provisions and comes with an $800 billion price tag. “The bill is fighting inflation and has a whole lot of collateral benefits as well,” said former Treasury Secretary Larry Summers, who reportedly helped craft the legislation.
According to a recent article from Vox, there are three big questions when it comes to the passage of the IRA:
- Will Arizona senator Kyrsten Sinema support the IRA?
- Will Democratic House moderates support the IRA?
- Will a vote on the IRA occur prior to the Senate’s annual summer recess, which is scheduled to begin on August 8?
While there are many hurdles to summit before the bill becomes law, it is important to remain aware of what is potentially in the works. Read on for an overview of the key items contained in the new act.
Provisions for Funding the IRA
In order to cover the $800 billion price tag of the IRA, authors of the legislation included a variety of savings- and revenue-related provisions. Here is a breakdown of how the IRA will be funded:
- Savings in the Healthcare Arena – $320 Billion
- Repeal of a Trump-era drug rebate rule ($120 Billion)
- An inflation cap on drug prices ($100 Billion)
- An allowance for Medicare to negotiate certain drug prices ($100 Billion)
- New Revenue – $470 Billions
- A new 15% corporate minimum tax ($315 Billion)
- Increased revenue as a result of IRS tax enforcement funding ($125 Billion)
- Closure of the carried interest loophole ($15 Billion)
- Methane and Superfund fees ($15 billion)
How IRA Funds Will be Spent
So how will the $800 billion raised via savings and new revenue be spent? Here is a brief overview of initiatives included in the IRA:
- Climate & Energy Spending – $385 Billion
- Creation of new clean manufacturing tax credits ($40 Billion)
- Establishment of additional clean electricity grants and loans ($30 Billion)
- Creation of a new “Clean Energy Technology Accelerator” ($30 Billion)
- Incentivization of clean agriculture ($30 Billion)
- Incentivization of clean electronic vehicle manufacturing ($20 Billion)
- Additional energy and climate provisions ($235 Billion)
- Healthcare Spending – $99 Billion
- A three-year extension of Obamacare subsidies for health care insurance costs ($64 Billion)
- A redesign of Medicare Part D and additional health care provisions ($35 Billion)
- IRS Funding – $80 Billion
- Funding for increased IRS enforcement
- Other Spending – $305 Billion
- Reducing the Federal deficit
As with any legislation in progress, pretty much everything about the IRA remains up in the air until it is enacted by the President. Please be assured that your HCJ CPAs & Advisors accounting advisors are keeping a close watch on the progress of the IRA and will keep you apprised of any major developments.