After more than a year of negotiations, congressional Democrats have successfully passed a major budget bill that includes massive investments to slow climate change, as well as significant new health care and tax policies. The bill now heads to President Joe Biden’s desk after the House voted 220-207 to approve it on Friday.
Known as the Inflation Reduction Act, the bill is a landmark achievement for Democrats and a central piece of Biden’s policy agenda finally come to fruition. Although it’s far smaller than the Build Back Better social spending and climate legislation Democrats once hoped to pass, the measure still contains huge investments in clean energy tax credits, a big change to Medicare’s role in drug price negotiation, and a new minimum tax for many corporations.
The legislation comes roughly nine months after Democrats passed an infrastructure bill that authorized $550 billion of new spending on roads, bridges, communications, and clean water. Together, the bills represent the most significant government spending on America’s physical infrastructure and climate investments in decades.
All told, the IRA is expected to include over $400 billion in spending and to bring in tens of billions more in revenue, resulting in substantial deficit reduction. According to economic experts who spoke with Vox, the legislation is also likely to reduce inflation slightly in the long term.
Last week, Senate Democrats passed the bill 51-50 along party lines, with Vice President Kamala Harris breaking the tie. This week, House Democrats similarly passed the legislation: every Democrat voted for the bill, and no Republicans did.
Lawmakers ultimately approved the bill just months before the November midterm elections, when Democrats will be navigating the typical backlash the president’s party usually faces, and asking voters to keep them in power. The passage of this legislation is a much-needed accomplishment for the party, and could help them make that case.
What’s in the bill
The bill’s main provisions focus on the following three areas:
- Health care, including allowing Medicare to negotiate prescription drug prices and extending ACA subsidies for three more years through 2025. The bill would also cap insulin out-of-pocket costs for Medicare beneficiaries at $35 per month, and require pharmaceutical companies to offer rebates to Medicare if they raise the price of drugs faster than the rate of inflation for beneficiaries.
- Taxes, including a new corporate minimum tax of 15 percent, funding for IRS enforcement, and a new 1 percent excise tax on stock buybacks. There are carveouts in the corporate minimum tax for certain manufacturers and private equity firms that essentially mean they’ll be able to pay less.
- Climate, including clean energy tax credits, environmental justice grants, and drought resilience funding.
Vox staff has an exhaustive look at how each will work here.
Once Biden signs the bill into law, its provisions will be able to go into effect over the next decade. Some of its policies, like tax credits for electric vehicles, will be accessible in the short term, while others, like lower prices due to prescription drug negotiations, won’t be felt for a few years.
Update, August 7, 3:20 pm: This story has been updated to reflect that the Inflation Reduction Act has passed the Senate.
Update, August 12, 5:43 pm: This story has been updated to reflect that the Inflation Reduction Act has passed the House.