On August 16, 2022, President Biden signed the Inflation Reduction Act into law. The Inflation Reduction Act is a landmark piece of legislation that aims to reduce the federal government budget deficit, lower prescription drug prices, and invest in domestic energy production while promoting clean energy. The Act is a budget reconciliation bill sponsored by Senators Chuck Schumer (D-NY) and Joe Manchin (D-WV).
Characteristics | Values |
---|---|
--- | --- |
Date of signing | 16th August 2022 |
Introduced by | Rep. Yarmuth, John A. [D-KY-3] |
Passed by House of Representatives | 19th November 2021 |
Passed by Senate | 7th August 2022 |
Became Public Law No. | 117-169 |
What You'll Learn
- The Inflation Reduction Act is the most significant action Congress has taken on clean energy and climate change in the nation's history
- The Act is a landmark piece of legislation
- The Act is a budget reconciliation bill
- The Act is not generally believed to have reduced inflation in 2022 and 2023
- The Act includes a large expansion of the Internal Revenue Service (IRS)
The Inflation Reduction Act is the most significant action Congress has taken on clean energy and climate change in the nation's history
The Act is a transformative law that is helping the United States meet its climate goals and strengthen energy security, investing in America to create good-paying jobs, reducing energy and health care costs for families, and making the tax code fairer. It is driving historic climate action and investing in America to create good-paying jobs and reduce costs.
The Act is delivering billions of dollars to protect communities from the impacts of climate change, and millions of seniors are saving money because their insulin costs are capped at $35 per month. It is the largest investment in rural electrification since the New Deal, and it includes the largest investment in disadvantaged communities with lower wages, lower college graduation rates, and lower employment rates.
The Act is projected to create more than 1.5 million additional jobs over the next decade and will cut electricity rates by as much as 9 percent and lower gas prices by as much as 13 percent by 2030. It will also enable the IRS to collect at least $150 billion in taxes already owed by wealthy people and big corporations.
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The Act is a landmark piece of legislation
The Inflation Reduction Act is a landmark piece of legislation. It is the most significant action Congress has taken on clean energy and climate change in the nation's history. It is the largest investment in clean energy and climate action ever. It is also the largest piece of federal legislation ever to address climate change. It is a transformative law that is helping the United States meet its climate goals and strengthen energy security, investing in America to create good-paying jobs, reducing energy and health care costs for families, and making the tax code fairer.
The Inflation Reduction Act is the largest investment in rural electrification since the New Deal—nearly $11 billion for rural electric co-ops—by funding rural co-ops to build clean, affordable, and reliable energy, which will create jobs and lower energy costs. The investment also provides forgivable loans for renewable energy projects located in or serving rural communities. The Department of Agriculture has also made available more than $1.3 billion in additional funding from the Inflation Reduction Act to provide agricultural producers and small rural businesses with the financing and funding they need to invest in clean energy and make energy efficiency improvements.
The Inflation Reduction Act is the most ambitious investment in combating the climate crisis in world history. The Department of Energy (DOE) released an updated study affirming the transformative climate progress driven by the Inflation Reduction Act and the Bipartisan Infrastructure Law. DOE estimates that the two laws will cut U.S. greenhouse gas emissions by up to 41% below 2005 levels by 2030. Together with additional actions being taken by federal, state, and local governments as well as the private sector, the United States is now on a path to achieve President Biden’s ambitious goal of cutting emissions 50-52% below 2005 levels by 2030 and reaching net-zero emissions by no later than 2050. This is consistent with external researchers, who project that U.S. greenhouse gas emissions will fall 43-48% below 2005 levels by 2035 thanks to laws already on the books.
The Inflation Reduction Act is the largest piece of federal legislation ever to address climate change. According to the CBO and JCT, it will invest $783 billion in provisions relating to energy security and climate change. This includes $663 billion in tax incentives, and $27 billion for a green bank created by amending the Clean Air Act. However, other forecasts differ from the CBO's and JCT's reports. A report by Credit Suisse projects that the total climate spending in the Act would be $800 billion, Goldman Sachs predicts a total of $1.2 trillion, the Penn Wharton Budget Model predicts $1.045 trillion, and an analysis by the Brookings Institution finds a central case of $902 billion.
The Inflation Reduction Act is a budget reconciliation bill sponsored by Senators Chuck Schumer (D-NY) and Joe Manchin (D-WV). The bill was the result of negotiations on the proposed Build Back Better Act, which was reduced and comprehensively reworked from its initial proposal after being opposed by Manchin. It was introduced as an amendment to the Build Back Better Act and the legislative text was substituted. All Democrats in the Senate and House voted for the bill while all voting Republicans voted against it. It was described as a landmark piece of legislation.
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The Act is a budget reconciliation bill
The Inflation Reduction Act is a budget reconciliation bill. Budget reconciliation is a legislative procedure established by the 1974 Congressional Budget and Impoundment Control Act. Reconciliation allows for expedited consideration of changes in law to align spending, revenue, and the debt limit with agreed-upon budget targets.
The Inflation Reduction Act was passed by the Senate on August 7, 2022, under FY2022 budget reconciliation instructions. It was then signed into law by President Biden on August 16, 2022.
Reconciliation bills are created when a concurrent budget resolution includes direct instructions to specified committees to make changes to laws within their jurisdiction to achieve a particular budget outcome. The bill that results from those instructions is known as a reconciliation bill.
Reconciliation bills receive expedited consideration in the Senate and can avoid the Senate's 60-vote filibuster threshold. This means that lawmakers can pass legislation with a simple majority vote.
The Congressional Budget Act of 1974 established the Congressional Budget Office, budget committees in the Senate and House, and a process for the adoption of a budget resolution and enforcement of the agreed-upon levels. The budget resolution must be adopted by both the House and Senate to be operative but does not require the President's signature.
Reconciliation instructions can be given for three specific purposes:
- To make changes in the statutory debt limit
- To make changes in revenues
- To make changes in direct (mandatory) spending
Reconciliation also has limitations, such as the Senate's Byrd Rule, which allows items that do not have a direct budgetary consequence to be removed. This rule aims to prevent reconciliation legislation from becoming a vehicle for policy changes unrelated to the nation's finances.
The Inflation Reduction Act is the most recent budget reconciliation bill to be enacted, with the previous one being the American Rescue Plan Act in 2021.
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The Act is not generally believed to have reduced inflation in 2022 and 2023
The Inflation Reduction Act is not generally believed to have reduced inflation in 2022 and 2023. However, some economists predict that it will bring down inflation in the medium-to-long term.
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The Act includes a large expansion of the Internal Revenue Service (IRS)
The Inflation Reduction Act includes a large expansion of the Internal Revenue Service (IRS) to improve customer service, modernize technology, and ensure the wealthy and large corporations pay the taxes they legally owe. The Act provides funding to hire more staff and upgrade critical technology infrastructure. The IRS has already improved services for law-abiding taxpayers, cutting phone wait times from 28 minutes last tax season to 3 minutes this year. The IRS has also digitized almost 225 times more returns than the previous year, cleared the backlog of unprocessed 2022 individual tax returns, and launched two new digital tools.
Over the next decade, these investments will enable the IRS to collect at least $150 billion in taxes already owed by wealthy people and big corporations. Going forward, the IRS is on track to implement additional improvements for customer service, including a direct-file pilot for a free, voluntary, IRS-run electronic filing system beginning in 2024; additional in-person services in rural and underserved areas; a processing initiative that will expedite refunds by several weeks; and new online account tools and mobile-friendly tax forms.
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Frequently asked questions
The Inflation Reduction Act is a landmark United States federal law that was passed by the 117th United States Congress and signed into law by President Joe Biden on August 16, 2022. It is a budget reconciliation bill that aims to reduce the federal government budget deficit, lower prescription drug prices, and invest in domestic energy production while promoting clean energy.
The Inflation Reduction Act includes the following key provisions:
- Imposing a selective 15% corporate minimum tax rate for companies with higher than $1 billion of annual financial statement income.
- Increased tax enforcement.
- Imposing a 1% excise tax on stock buybacks.
- Extending the limitation on excess business losses.
- Addressing domestic energy security and climate change, including funding for drought resilience in western states.
- Continuing the expansion of Affordable Care Act subsidies.
- Capping insulin costs at $35/month for Medicare beneficiaries.
- Making the wealthy and big corporations pay their fair share by raising $300 billion over a decade.
- Investing in modernizing the IRS, including hiring more staff and upgrading critical technology infrastructure.
The Inflation Reduction Act has several benefits, including:
- Reducing the federal government budget deficit.
- Lowering prescription drug prices.
- Investing in domestic energy production and promoting clean energy.
- Creating good-paying jobs.
- Reducing energy and health care costs for families.
- Making the tax code fairer.