Biden's Inflation Bill
September 30, 2022
President Joe Biden’s new Inflation Reduction Act has just been passed by the Senate, and it is a big win for the Democrats. The bill is said to make healthcare more affordable, aid in the fight against global warming, and reduce the U.S’s budget deficit, all while not raising taxes on households earning less than $400,000 per year. These were all big parts of President Biden’s agenda, but how much of this is actually possible, and at what cost?
The first part of this bill involves President Obama’s Affordable Care Act. He plans to lower the cost of all those covered by the act, saving about 13 million people covered by the act, around $800 a year. The bill also outlines a maximum price that seniors can pay for prescription medicine in a year, as $2,000. The estimated cost for these parts of his bill is about $70 billion.
The bill also is said to attack the climate crisis. The goal is to bring down how much an average family spends on energy, by about $500 a year, by using tax credits. Tax credits are like a point system, and it reduces the amount of taxes you owe, for example, if you owe $50 in taxes, but you have a $30 tax credit, you only owe $20. Essentially, it’s like a money-back system that will encourage homeowners to buy more economy-friendly appliances, by providing tax credits for those items.
Biden also plans to implement manufacturing tax credits encouraging companies to build clean energy devices. The list includes solar panels and wind turbines. He also hopes that this will create new job opportunities in America.
Biden’s bill is also projected to lower the U.S budget deficit by $300 million. A budget deficit means that the U.S is spending more money than it is earning, so the lower the deficit the better. The U.S has been in a deficit since 2001, which was the last year we were in a surplus, meaning we earn more money than we spend. Due to the pandemic, the U.S budget deficit skyrocketed, so any decrease in the deficit is good news for the country.
Here is a chart of America’s budget deficit over the last two decades:
One of the biggest selling points of this bill was Biden’s promise that households earning under $400,000 a year would not experience an increase in taxes. This is where things get a little tricky. A better way to phrase this would be that families earning under $400,000 a year would experience a net gain if the bill was implemented. There is a possibility that there would be a slight tax increase, but the justification for that was that the reduction of cost for those under the affordable health care act and tax credits for buying eco-friendly appliances, would more than compensate for the slight increase in taxes.
This begs the important question, where is the money for this bill coming from? The answer is, the wealthy. While the estimated average increase of taxes for all Americans is about 1.4%, it is highly likely the brunt of that extra tax will fall onto the wealthy. Biden also attacks corporations, forcing all corporations reporting over $1 billion in earnings per year, to pay a minimum of 15% tax. The bill is also said to close a tax loophole that private equity and hedge fund managers have been using to get away with paying lower taxes. The tax money from these groups of people is what Biden is counting on to fund his Inflation Reduction Act, which is why it was no secret that the Republicans would oppose the bill. The vote in the Senate came down to a 50-50 split, leaving it up to Vice President Kamala Harris to provide the tie-breaking vote, changing it to a 51-50 vote in favor of the bill.
Overall, the bill is good news for any climate enthusiasts out there. The bill is a game changer for seniors struggling with the cost of prescription drugs all across the country. Finally, this was a huge win for Democrats, and especially for President Biden.