Senate Passes Inflation Reduction Act
The U.S. Senate recently passed the $437 billion Inflation Reduction Act (IRA), a bill focusing on President Joe Biden’s domestic agenda items of tax, climate and health care.
The IRA was passed through the reconciliation process, which exempts certain tax and spending measures from a filibuster and requires a simple majority to pass. The vote was along party lines, with 51 Democrats in favor to 50 Republicans against. Vice President Kamala Harris cast the tie-breaking vote after a 16-hour "vote-a-rama," where any senator could introduce an amendment as part of the reconciliation process. The IRA now goes to the House, where it is expected to pass on Friday. President Biden is also expected to sign the bill.
Reduced from its original cost of $6 trillion, key elements of the legislation are as follows:
- Medicare would be allowed to negotiate drug prices, starting with 10 high-priced drugs by the middle of this decade, and would cap out-of-pocket drug costs for seniors enrolled in Part D at $2,000 per year. The savings would be used to pay for three years of subsidized Affordable Care Act premiums.
- $374 billion would be allocated to climate and energy spending, including expanded tax credits for renewable energy projects. It would also end per-manufacturer limits for the $7,500 tax credit for electric vehicle purchases as long as the vehicles are built in North America.
- A 15% corporate minimum tax on large firms, a 1% excise tax on the value of stock buybacks and an $80 billion increase in funding to the IRS for enforcement would be implemented.
- Former President Donald Trump's 2017 tax cuts would remain unchanged by the bill. The bill also retains the carried interest tax break for private equity.
The bill does not address two key Democratic agenda items, the implementation of the 15% global minimum tax that Treasury Secretary Janet Yellen negotiated with nearly 140 countries last year and the increase of the $10,000 cap on the state and local tax deduction (SALT).
TSCPA will continue to provide updates to this story.