President Joe Biden signed the Inflation Reduction Act of 2022 into law on August 16. The provisions of the new bill include large investments in health care and making prescription drugs more affordable. Other large investments include fighting climate change and taxing wealthy corporations. The bill also provides a continuation of the Affordable Care Act premium subsidies until the end of 2024.
While the bill includes this in its name, economists estimate that it likely will not do much to pull down the inflation rate. However, the newly signed bill still accomplishes many legislative initiatives that have been stuck in congressional debate for decades. According to the Congressional Budget Office (“CBO”), a federal agency that provides budget and economic information to Congress, the bill will not have much of an effect on inflation in the short term. Another estimate from the CBO even shows the bill slightly increasing inflation.
A few of the bigger provisions from the Inflation Reduction Act of 2022 include a creation of a minimum 15% corporate tax rate on corporations with at least $1 billion in income. Individual and household taxes will not see an increase. The new bill also allows Medicare to exercise a long-awaited right to negotiate the price of certain prescription drugs, which will bring down the price for beneficiaries. Beginning in 2025, Medicare recipients will have a $2,000 cap on annual out-of-pocket prescription drug costs. Another big provision includes an investment in the IRS tax enforcement, which allocates $80 billion to the nation’s tax agency over the next 10 years. The bill also provides numerous investments in climate protection including tax credits for households and corporations that invest in cleaner energy solutions.
While the CBO estimates that the bill will have a negligible effect on inflation, the CBO also estimates the bill will decrease the deficit by more than $100 billion over the next decade. Environmentalists are lauding the bill as a breakthrough in climate policy. Investments in renewable energy will surely increase and adoption of new energy distribution technologies should also rise. New companies in renewable energy, energy storage solutions, and electric transportation will benefit from this bill.
Robbins LLP will continue to monitor these new provisions and the corporations in these industries to protect shareholders and their investments.