Less robust than President Joe Biden’s once proposed proposal to rebuild America’s public infrastructure and family support systems, the Democrats’ compromise on health care, climate change and deficit reduction strategies remains a significant undertaking.
The estimated $740 billion package — passed Sunday by the Senate and headed to the House — is full of partisan priorities. These include capping prescription drug costs at $2,000 out-of-pocket for seniors, helping Americans pay for private health insurance and what Democrats are calling the most significant investment in history to fight climate change, about $375 billion with last ten years.
Almost half of the money raised, $300 billion, will go to pay federal deficits.
It’s all mostly paid for with new corporate taxes, including a 15% minimum tax on large corporations to ensure they don’t pay out of pocket any taxes.
Dubbed the “Inflation Relief Act of 2022,” it’s not at all clear that the 755-page bill will significantly ease inflationary pressures, though millions of Americans are expected to see some relief in health care and costs another.
The votes fell strictly along party lines in the Senate 50-50, with all Democrats in favor, all Republicans against, with Vice President Kamala Harris providing the tying vote for passage 51-50. The House is expected to vote by Friday.
A look at the ins and outs of the final package:
LOWER PRESCRIPTION DRUG COSTS
A long-sought goal, the bill would allow the Medicare program to negotiate prescription drug prices with pharmaceutical companies, saving the federal government about $288 billion over the 10-year budget window.
Those new revenues would be plowed back into lower costs for seniors on medications, including a $2,000 out-of-pocket limit for older adults who buy prescriptions from pharmacies.
The money would also be used to provide free vaccines to seniors, who are now among the few not guaranteed free access, according to a summary document.
Insulin prices for seniors would also be capped at $35 per dose. A provision to extend that price cap on insulin to Americans with private health insurance was in line with Senate budget rules and Republicans removed it from the final bill.
PAY ASSISTANCE FOR HEALTH INSURANCE
The bill would expand subsidies made available during the COVID-19 pandemic to help some Americans who buy health insurance on their own.
Under earlier pandemic relief, the additional aid was set to expire this year. But the bill would allow the assistance to continue for three more years, lowering insurance premiums for people buying their own health care policies.
‘LARGEST INDIVIDUAL INVESTMENT IN CLIMATE CHANGE IN US HISTORY’
The bill would invest nearly $375 billion over the decade in strategies to combat climate change including investments in renewable energy production and tax rebates for consumers to purchase new or used electric vehicles.
It is 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 support industries that can help curb dependency of the country on fossil fuels. The bill also gives tax credits for nuclear power and carbon capture technology that oil companies such as Exxon Mobil have invested millions of dollars to advance.
The bill would impose a new fee on excess methane emissions from oil and gas drilling while giving fossil fuel companies access to more leases on federal lands and waters.
A late addition pushed by Sen. Kyrsten Sinema, D-Ariz., and other Democrats in Arizona, Nevada and Colorado would designate $4 billion to fight a mega-drought in the West, including conservation efforts in the Colorado River Basin, which left almost 40 years. million Americans depend on for drinking water.
For consumers, there are tax breaks as incentives to go green. One is a 10-year consumer tax credit for renewable energy investments in wind and solar. There are tax breaks for purchasing electric vehicles, including a $4,000 tax credit for the purchase of used electric vehicles and $7,500 for new vehicles.
Overall, Democrats believe the strategy could put the country on a path to reduce greenhouse gas emissions by 40% by 2030, and “would be the largest single climate investment in US history, by far.”
HOW TO PAY FOR ALL THIS?
The biggest revenue raiser in the bill is a new 15% minimum tax on corporations that earn more than $1 billion in annual profits.
It’s a way to pressure the roughly 200 US companies that avoid paying the standard 21% corporate tax rate, including some that pay no taxes at all.
The new minimum corporate tax would kick in after the 2022 tax year and raise about $258 billion over the past decade.
Revenue would be $313 billion, but Sinema argued for one change to the 15% corporate minimum, which would allow a depreciation deduction used by manufacturing industries. That leaves about $55 billion of total revenue.
To defeat Sinema, Democrats dropped plans to close a long tax loophole for wealthier Americans – so-called carried interest, which, under current law, charges wealthy hedge fund managers and others at a rate of 20 %.
There has been an attempt over the years on the left to increase the carried interest tax rate, rising to 37% in the original bill, more in line with upper income earners. Sinema would not allow it.
Keeping the tax break for the wealthy will take $14 billion out of the income they depended on to help pay for the package.
Instead, Democrats, with Sinema’s nod, will impose a 1% excise tax on stock buybacks, which will raise about $74 billion over the decade.
Money is also raised by encouraging the IRS to go after tax cheats. The bill proposes an $80 billion investment in taxpayer services, enforcement and modernization, which is estimated to raise $203 billion in new revenue—a net gain of $124 billion over the decade.
The bill sticks to Biden’s original pledge not to raise taxes on households or businesses making less than $400,000 a year.
The lower drug prices for the elderly are paid for with savings from Medicare’s negotiations with the drug companies.
ADDITIONAL MONEY TO PAY DEFICIENCIES
With about $740 billion in new revenue and about $440 billion in new investments, the bill promises to put the difference of about $300 billion toward deficit reduction.
Federal deficits have ballooned during the COVID-19 pandemic as federal spending rose and tax revenue fell as the nation’s economy went through shutdowns, office closures and other massive changes.
Deficits have risen and fallen in the nation in recent years. But overall federal budgeting is on an unsustainable path, according to the Congressional Budget Office, which released a new report this week on long-term projections.
WHAT IS LEFT BEHIND?
This latest package emerged suddenly at the end of July after 18 months of initial negotiations that leave behind many of Biden’s more ambitious goals.
Senate Majority Leader Chuck Schumer, DNY., struck a deal with Sen. Joe Manchin to revive the Biden package, narrowing it down to bring the West Virginia Democrat back to the negotiating table. Then, they pulled Sinema, the other party hold, with further changes.
The package is still strong, by normal standards, but nowhere near the comprehensive Build Back Better Biden program when imagined.
While Congress successfully passed a $1 trillion bipartisan infrastructure bill for highways, broadband and other investments that Biden signed into law last year, the president’s and the party’s other top priorities have slipped.
Among them is the continuation of a $300 monthly child tax credit that has been sending money directly to families during the pandemic and is believed to have greatly reduced child poverty.
Also gone, for now, are plans for free pre-kindergarten and community college, as well as the nation’s first paid family leave program that would provide up to $4,000 a month for births, deaths and needs other vitals.
Associated Press writer Matthew Daly contributed to this report.