Tuesday, Aug. 9, 2022 | 2 a.m.
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The U.S. Senate approved a sweeping package to combat climate change, fight inflation, invest in energy production and reduce carbon emissions by roughly 40% by 2030.
The Inflation Reduction Act of 2022 will also allow Medicare to negotiate for prescription drug prices and extend former President Barack Obama’s expanded Affordable Care Act program for three more years.
The legislation, which next goes to the Democrat-majority U.S. House of Representatives, will use Fiscal Year 2022 reconciliation instructions to raise revenue, according to the Committee for a Responsible Federal Budget.
It is part of the FY 2022 Budget Reconciliation bill and will put $300 billion into Deficit Reduction and $369 billion into Energy Security and Climate Change programs over the next 10 years, according to a summary of the legislation on the Democrat Senate’s website.
“This is a major victory for hardworking Nevadans that will lower prescription drug and health care costs, fight inflation, cut the deficit, combat drought, and create clean-energy jobs in Nevada,” Sen. Catherine Cortez Masto, D-Nev., said on Twitter after the vote Sunday.
Republicans oppose the legislation, claiming that it will raise taxes on “businesses and working families” in Nevada as claimed by Senate candidate and former Attorney General Adam Laxalt.
But what exactly does the legislation do? And how will it affect Nevadans? Here’s five things you should know about the Inflation Reduction Act.
It aims to significantly fight global warming.
The Inflation Reduction Act's lofty emissions-reduction target has earned the support of many conservation and climate change organizations.
Last week the Nevada Conservation League held a press conference, urging Nevada’s U.S. Sens. Cortez Masto and Jacky Rosen to vote in favor of the legislation.
“The cost of inaction on climate is simply too high, and it's increasing every second you delay.” said Democratic state Sen. Dallas Harris at the press conference. “Climate change is making extreme weather events more frequent and severe with communities across the country paying the price, literally.”
Last year, the U.S. had about 20 extreme weather events, including a spat of wildfires and a severe drought and heat wave across the western U.S., with losses exceeding $1 billion each, Harris said.
By 2050, it is predicted that Nevada’s heat-wave days will increase from 15 to about 55 days per year, according to States at Risk.
To curb those impacts of climate change, the legislation has some provisions that could help. Those include tax credits to increase U.S. manufacturing of renewable energy, like solar panels, wind turbines and lithium batteries; a $10 billion investment in tax credit to build clean technology manufacturing facilities, such as facilities that make electric vehicles; and $2 billion in grants to restructure existing manufacturing facilities to build clean vehicles. It also will invest $9 billion in consumer home energy rebate programs, helping low-income families retrofit their homes to save energy and rely more on clean energy by installing heat pumps, rooftop solar panels and electric HVAC systems.
The legislation also will provide a $4,000 consumer tax credit to lower- and middle-income customers to go toward purchases of used electric vehicles.
In its aim to “decarbonize the economy,” according to a summary of the energy security and climate change investments on the Democrat Senate’s website, the legislation will provide $30 billion in grant and loan programs for states and utilities to transition to clean electricity.
The $6 billion Advanced Industrial Facilities Deployment Program that is part of the package aims to reduce emissions from large industrial emitters like chemical, steel and cement plants through grant and tax credit programs.
The Inflation Reduction Act also includes a $60 billion investment in more disadvantaged communities, as rising temperatures and impacts of climate change disproportionately affect communities of color. The Environmental and Climate Justice Block Grants, for instance, will fund “community-led projects in disadvantaged communities and community capacity building centers to address disproportionate environmental and public health harms related to pollution and climate change,” according to the summary.
It can help Nevada and other western states deal with drought.
Democratic senators from western states, including Cortez Masto, Mark Kelly, D-Ariz., and Michael Bennet, D-Colo., worked together to include funding for combating droughts in the west as part of the Inflation Reduction Act package. Four billion dollars in funding will aid the Bureau of Reclamation in combating drought.
“The Western United States is experiencing an unprecedented drought, and it is essential that we have the resources we need to support our states’ efforts to combat climate change, conserve water resources, and protect the Colorado River Basin,” Cortez Masto said in a statement. “This funding in the Inflation Reduction Act will serve as an important resource for Nevada, Arizona, and Colorado, and the work we’ve done to include it will help secure the West’s water future.”
Nevada and other western states have been in a yearslong drought, with the water levels of Lake Mead, which millions depend on for water, declining year after year. Local, state, federal and tribal parties have all been considering ways to conserve water.
For patients with Medicare, health care costs will be lower.
The legislation includes some pretty major changes for people with Medicare. It caps Medicare out-of-pocket costs at $2,000, and it caps insulin costs at $35 per month for those on Medicare. It also allows Medicare to negotiate prescription drug prices.
The Inflation Reduction Act also keeps drug prices in Medicare from rising faster than inflation, according to Health Care Finance News.
The Democrats had tried to cap the cost of insulin for all, both on public and private health insurance, but that provision failed.
AARP Nevada thanked the senators for passing the legislation, saying it will help lower the cost for seniors’ medications.
“Since AARP’s founding we have fought for older adults to have access to affordable health care — including prescription drugs, said AARP Chief Executive Officer Jo Ann Jenkins in a statement. “And we have been working for nearly two decades to allow Medicare to negotiate the price it pays for medications. Thanks to today’s historic vote in the Senate, millions of Americans 50+ are one step closer to real relief from out-of-control prescription drug prices.”
The bill will save Medicare about $288 billion, the statement says, and it will give seniors a “peace of mind” knowing that there will be an annual limit on what they must pay out-of-pocket for health-care services.
If your family makes $400,000 or less, you’re in the clear.
There will be no new taxes on families that make $400,000 or less as well as no new taxes on small businesses, according to Secretary of the Treasury Janet L. Yellen.
Part of Republicans' argument in opposition to the bill are claims that it will increase taxes for people in every income bracket, but that is misleading.
According to a fact-checking article from PolitiFact, the Joint Committee on Taxation’s analysis of the legislation did find that the federal tax burden for all Americans would rise by 1.4%, but for people making between $30,000 and $100,000, the increase would be less than 1%. But the joint committee’s analysis only looked at the tax side of the bill and not at the spending provisions that could cancel out those tax increases, according to PolitiFact.
“It’s important to note that the (bill) does not raise taxes on those making less than $400,000 per year,” the Committee for a Responsible Federal Budget wrote. “It will indirectly affect those households in a number of ways, but even then, the net effect is likely to be to increase their real disposable income.”
It will cost about $485 billion and will bring in $790 billion in revenue, bringing the net deficit reduction to $305 billion.
The Committee for a Responsible Federal Budget said the legislation is “likely to reduce inflationary pressures and thus reduce the risk of a possible recession.”
The Inflation Reduction Act will repeal the Trump-era drug rebate rule, which is expected to save the U.S. $122 billion. It will cap drug price inflation, with savings estimated at $101 billion, and it will allow for the negotiation of certain drug prices, with estimated savings of about $99 billion.
The 15% minimum corporate tax, is expected to add $313 billion, and IRS tax enforcement funding is expected to make up $124 billion. There will be a methane fee, superfund fee and other revenue that will bring in an estimated $18 billion, and the closure of carried interest loophole is expected to generate $13 billion.
The Congressional Budget Office, which provides impartial analysis for Congress, estimates the legislation would result in a net decrease in the deficit totaling $102 billion. A budget deficit, according to Investopedia, happens when current expenses exceed the amount of income received through standard operations.
The Congressional Budget Office expects the legislation would reduce net spending by almost $15 billion through 2031 because the prescription drug savings would be larger than new spending.
It will also cut net taxes slightly by about $2 billion per year, but the expanded energy and climate tax credits will match the size of new tax increases. The legislation will generate about $300 billion of net revenue over a decade, according to the Committee for a Responsible Federal Budget. There will also be higher wages as a result of lower health premiums, it predicts.
