(WASHINGTON) — What started as a $4 trillion effort during President Joe Biden’s first months in office to rebuild America’s public infrastructure and family support systems has ended up a much slimmer, but not unsubstantial, compromise package of inflation-fighting health care, climate change and deficit reduction strategies that appears headed toward quick votes in Congress.
Lawmakers are poring over the $739 billion proposal struck by two top negotiators, Senate Majority Leader Chuck Schumer and holdout Sen. Joe Manchin, the conservative West Virginia Democrat who rejected Biden’s earlier drafts but surprised colleagues late Wednesday with a new one.
What’s in, and out, of the Democrats’ 725-page “Inflation Reduction Act of 2022” as it stands now:
Lower prescription drug costs
The bill, which would enable the Medicare program negotiate prices for prescription drugs with drug companies, is a step towards achieving a long-awaited goal. It will also save the federal government $288 billion in the 10-year budget window.
These revenues will be used to reduce the cost of seniors’ medications. This includes an out-of-pocket limit for seniors who purchase prescriptions from pharmacies for $2,000
According to a summary, money could also be used for free vaccinations to seniors who are currently among those not entitled to free access.
Health insurance: Help to pay
To help Americans who purchase their own health insurance, the bill will extend subsidies that were provided in the COVID-19 epidemic.
The extra assistance was to be stopped under earlier pandemic relief. The bill allows the aid to continue for three years. This will lower insurance premiums for those who purchase their own policies for health care.
‘Single biggest investment in climate change in U.S. history’
It would provide $369 billion to climate-change efforts over the next decade. This includes investments in renewable energy and tax incentives for customers who purchase new or used electric cars.
It’s broken down to include $60 billion for a clean energy manufacturing tax credit and $30 billion for a production tax credit for wind and solar, seen as ways to boost and support the industries that can help curb the country’s dependence on fossil fuels.
There are incentives for consumers to be green by offering tax breaks. A 10-year credit is available to consumers for solar and wind energy investment. Tax breaks are available for purchasing electric vehicles. These include a $4,000 tax credit to purchase used vehicles, and $7,500 for the purchase of new vehicles.
In all, Democrats believe the strategy could put the country on a path to cut greenhouse gas emissions 40% by 2030, and “would represent the single biggest climate investment in U.S. history, by far.”
What is the best way to finance all this?
A new minimum 15% tax on corporate profits exceeding $1 billion annually is the biggest revenue-raiser.
It’s a way to clamp down on some 200 U.S. companies that avoid paying the standard 21% corporate tax rate, including some that end up paying no taxes at all.
A new corporate minimum tax, which would be effective after 2022’s tax year, will raise approximately $313 billion in the next decade.
The IRS is also boosted in order to prosecute tax cheats. The bill proposes an $80 billion investment in taxpayer services, enforcement and modernization, which is projected to raise $203 billion in new revenue — a net gain of $124 billion over the decade.
The bill sticks with Biden’s original pledge not to raise taxes on families or businesses making less than $400,000 a year.
The lower drug prices for seniors are paid for with savings from Medicare’s negotiations with the drug companies.
To reduce deficits, extra money
The bill will generate $739 billion of new revenue, and $433 billion worth of new investments. It promises to reduce the deficit.
Federal deficits have spiked during the COVID-19 pandemic when federal spending soared and tax revenues fell as the nation’s economy churned through shutdowns, closed offices and other massive changes.
Recent years have seen the deficits of our nation fluctuate between rising and falling. However, overall federal budgeting appears to be on an untenable path according the Congressional Budget Office. This week, they released a new report on long-term projections.
What’s left behind
This latest package after 18 months of start-stop negotiations leaves behind many of Biden’s more ambitious goals.
While Congress did pass a $1 trillion bipartisan infrastructure bill of highway, broadband and other investments that Biden signed into law last year, the president’s and the party’s other priorities have slipped away.
There was also a continuing of the $300 per month child tax credit which sent money to families directly during the pandemic. This credits is thought to have greatly reduced child poverty.
Also gone, for now, are plans for free pre-kindergarten and free community college, as well as the nation’s first paid family leave program that would have provided up to $4,000 a month for births, deaths and other pivotal needs.
Matthew Daly, an Associated Press journalist, contributed to the report.
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