What is the Inflation Reduction Act?
On August 16th, 2022, President Joe Biden signed what’s known as the Inflation Reduction Act of 2022. What is it and how will it impact you and your family? In short, this bill aims to make prescription drugs and health care more affordable while also heavily taxing large (and wealthy) corporations in order to fight climate change. Let’s take a look at how this bill might affect you in the years to come.
What’s In the Bill?
The Inflation Reduction Act hits a lot of this country’s pain points and is the culmination of several plans and promises President Biden has given and envisioned over the years. This act has a few large provisions listed below:
Corporate Minimum Tax Rate of 15%
If a corporation brings in an income of at least $1 billion, it will be given the new tax rate of 15%. While this increase is doled out upon wealthy corporations, individuals and households will not be impacted. If corporations participate in stock buybacks, they will also be given an excise tax of 1%.
Reform of Prescription Drug Prices
Beginning in 2025, everyone on Medicare will have a cap placed upon their out-of-pocket prescription drug costs of $2000 annually. Medicare itself will be allowed to negotiate certain prescription drug prices which will result in a lower medication price over all for their beneficiaries. This is likely one of the most significant changes of this bill.
Tax Enforcement of the IRS
For several years, the IRS has complained of being severely underfunded which results in difficulties, and sometimes impossibilities, to perform all of its duties. Over the next decade, the Inflation Reduction Act aims to invest a much-needed $80 billion into the Internal Revenue Service.
A Subsidy Extension for the Affordable Care Act (ACA)
Through the Inflation Reduction Act, the Affordable Care Act subsidies will not expire, but be extended through 2025 until President Biden’s new bill takes effect. If the subsidies hadn’t been extended, upwards of 3 million Americans would likely lose their health insurance.
Climate Change and Energy Security Investments
While this bill focuses on the healthcare industry, it also focuses on reducing climate change. The bill includes several investments regarding the protection of our climate, such as tax credits that help with rising energy costs, tax credits that reward carbon emissions reduction, and pouring investments into producing clean energy.
Unlikely to Affect Inflation Rates
Despite the name of this bill, it seems the Inflation Reduction Act will not necessarily impact the rising costs of inflation. However, the bill is absolutely vital with regards to climate change and the soaring price of healthcare and prescription drugs. Over the next ten years, we should be able to see a marked change in these two arenas, and that change for the better. The Inflation Reduction Act will likely go down in history as the legacy of President Biden.
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