On Wednesday, Senator Manchin issued a statement expressing his support for a new compromise known as the Inflation Reduction Act of 2022.
This bill addresses a wide range of issues, including the cost of prescription drugs, taxes on corporations, and the state of the environment.
The new bill, for which Democrats have made a one-page information sheet available, is much less than what the party had advocated for in Build Back Better but is significantly more expansive than the reconciliation proposal that Manchin signed on to a few weeks ago.
As of the beginning of this month, Senator Manchin had only expressed support for legislation that would continue ACA subsidies and reduce the cost of prescription drugs.
He had maintained that anything further would lead to an increase in inflation, which would be detrimental to the economy.
Now, according to Manchin, he has discovered a mechanism to lower inflation (whether or not that is right is uncertain), as well as advance the legislative agenda of the Democrats.
The Inflation Reduction Act of 2022: Its Provisions and Contents
The most recent deal includes the health care elements that were previously agreed upon, in addition to a corporate minimum tax of 15 per cent, a proposal to remove the carried interest tax loophole, and a provision for IRS enforcement.
In addition to this, it includes historic expenditure for the environment, but on a scale that is smaller than what the House had envisioned for last year’s budget.
The Democrats believe that the plan as a whole will result in a revenue increase of $739 billion and an increase in spending of $433 billion.
Additionally, it accomplishes Manchin’s goal of decreasing the deficit, and it would do so by an amount equal to or greater than $300 billion.
Despite being somewhat less ambitious than the provisions in the $1.75 trillion package that the House of Representatives approved the previous year, the bill’s investments in areas like as clean energy, tax credits, and reducing the costs of health care remain noteworthy.
Shortly after the CHIPS+ bill was unanimously approved by the Senate with backing from both parties, Manchin made his announcement.
In the past, Senate Minority Leader Mitch McConnell had threatened to keep that bill hostage if Democrats persisted in their pursuit of reconciliation.
However, after CHIPS+ was passed, it seemed like Democrats had more leeway to move forward with this plan and put it forward.
The following is a list of the most important provisions that the legislation includes:
Taxes
Introduces a new minimum tax rate for corporations of 15 per cent: Although legally corporations are subject to a tax rate of 21 per cent, many of them take use of loopholes to pay significantly less than that.
It is anticipated that the government will receive an additional $313 billion in income as a direct result of the passage of this bill, which mandates a minimum tax rate of 15 per cent for corporations that achieve annual profits of more than one billion dollars.
IRS enforcement: It is estimated that the United States loses a total of one trillion dollars annually owing to fake tax filings and questionable accounting practices.
It is anticipated that the legislation, along with another spending on the IRS, will bring in a total of 124 billion dollars.
The legislation would invest millions of dollars into the IRS to assist the agency in locating these funds.
Eliminates the tax loophole relating to carried interest: Money managers, such as those who manage hedge funds, can take advantage of a tax loophole known as the carried interest loophole, which allows them to pay taxes at a rate that is twenty per cent lower on the remuneration they receive for managing and investing customers’ funds.
This plan would narrow that loophole and oblige managers to pay an income tax on their salary at a rate of up to 37 per cent, which is the highest percentage that applies to earnings that are considered standard. If put into action, it has the potential to generate $14 billion in revenue.
Care For The Sick
Makes it possible for Medicare to negotiate the pricing of prescription pharmaceuticals At the present time, Medicare is unable to negotiate the prices of prescription drugs; as a result, the manufacturer determines the cost.
This law gives Medicare the authority to negotiate prices for 10 medications in the first year after it takes effect in 2023.
It is estimated that the revenue that will be generated as a result of these negotiations will be $288 billion. This is because Medicare will save money as a result of the negotiations.
Extends funding for the Affordable Care Act by three years: As part of the American Rescue Plan, senators gave their approval to subsidies that would reduce the amount that millions of individuals would have to pay for their insurance premiums under the Affordable Care Act.
These subsidies are now slated to expire at the end of this year; but, if passed, this law will prolong them for a further three years, all the way up until 2025. It is anticipated that this provision will cost $64 billion.
Climate
Tax credits for renewable energy: There have been significant investments made in a diverse array of tax credits, some of which aim to improve the energy efficiency of homes, others to encourage the purchase of vehicles that run on clean energy, and still others to encourage the use of clean sources of electricity and energy storage.
Industry and manufacturing: The bill also includes significant funding aimed at curbing existing pollution from manufacturing and pushing for the establishment of more manufacturing facilities in the United States that help produce clean energy products like solar panels and electric cars.
In addition, the bill encourages the establishment of more manufacturing facilities in other countries, such as China and India, that help produce clean energy products.
Environmental justice refers to the practice of allocating vast sums of money in the form of grants specifically to regions that have been subjected to disproportionately high levels of pollution.
The funding is intended to assist these regions in warding off potential threats to public health.
A portion of these monies is also designated to mitigate the negative effects that transportation infrastructure and other types of public projects have on the communities they are built in.
Where Does The Bill Go From Here?
Because the budget reconciliation process enables Democrats to move policy forward with just 51 votes and does not require support from Republicans, Democrats have long planned to make use of this process to pass many of these provisions. This process enables Democrats to move policy forward.
This week, Schumer made the announcement that the party intended to vote on this bill the next week, and then pass it before recessing on August 5th.
The GDP fell once more, but this may not necessarily indicate that we are in a recession.
Uncertainty persists regarding the practicability of that timetable.
The legislation has been sent to the Senate parliamentarian, who is an expert in procedure and will advise on whether the provisions address taxing and spending sufficiently to qualify for budget reconciliation; it will take her some time to review the package.
The parliamentarian is an expert in procedural matters. If the parliamentarian gives the go-ahead signal, the Democrats will be allowed to vote on and approve the bill, after which it will be sent to the House. Should she fail to do so, the party will most likely make changes to the law.
There are still some additional questions that need answering as well. Sen. Kyrsten Sinema (D-Arizona), who had previously voiced opposition to particular hikes in corporation taxes proposed in Build Back Better, has not stated whether or not she will back the Inflation Reduction Act as of this point.
In a similar vein, it is not yet clear what the support will look like in the House, particularly from a contingent of moderate Democrats who had demanded that the bill bring back the state and local tax deduction, also known as SALT. Similarly, it is not yet clear what the support will look like in the Senate.
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An increase in COVID-19 cases, including those among Senate Democrats, further complicates the situation.
The Senate Democrats will need every vote they have to pass any reconciliation bill, so they will need every case they have.
After Manchin made a similar announcement earlier in the week, Senator Dick Durbin (Democrat of Illinois) disclosed on Thursday that he had also tested positive for Covid-19.
Both will most likely be able to return in time to participate in a vote if one takes place the following week, even though any new instances could add to the degree of uncertainty.
If lawmakers do not agree to remain in town for longer than they had initially intended, the immediate approval of the bill could be in peril as a result of all of these circumstances.
