After months of uncertainty and infighting among Democrats, the Senate on Sunday passed a sweeping bill designed to reduce health care costs, combat climate change and reduce the federal deficit. It is a pared-down version of legislation President Joe Biden has long sought to bolster his economic agenda.
Despite its name, it isn’t clear that the Inflation Reduction Act will stem rising prices across the economy. But the bill aims to reduce prescription drug costs by letting Medicare negotiate with pharmaceutical companies and extends pandemic-era health insurance subsidies that were set to expire at the end of the year.
It also makes a historic investment in low-carbon energy and transportation, intended to counter climate change, in the form of tax incentives for companies and consumers.
To help pay for that spending, the bill imposes a 15% minimum tax on corporations that earn more than $1 billion in yearly profit, a provision that targets some of the biggest companies that avoid paying the standard 21% corporate tax rate, along with other taxes on the nation’s wealthiest people and corporations. It also provides funding to help the Internal Revenue Service crack down on tax dodging.
Those provisions would raise about $740 billion in new revenue over a decade, according to projections by the nonpartisan Congressional Budget Office. With roughly $440 billion in new spending over that period, the remaining $300 billion would reduce federal deficits that have ballooned from pandemic-era spending.
Sen. Patty Murray, a Washington Democrat who helped craft the bill as chair of the Senate Health Committee, said Friday it would not raise taxes on working families by “one penny,” in keeping with Biden’s pledge to target tax hikes only at people who make more than $400,000 a year.
“Passing this legislation will be a really big deal,” Murray said in a statement, “and it marks a historic turning point in how we tackle the climate crisis in this country, while lowering everyday costs for families everywhere in Washington state.”
The bill passed on a party-line vote as Vice President Kamala Harris broke a 50-50 tie, with GOP senators universally opposed. Democrats used a procedure called budget reconciliation to pass the bill with only a simple majority instead of the 60 votes needed to pass most legislation, the same process Republicans used to pass then-President Donald Trump’s signature bill in 2017 that cut taxes on corporations and the wealthy.
Sen. Mike Crapo of Idaho, the top Republican on the Senate Finance Committee and a leading critic of the Democrats’ bill, compared it to the $1.9 trillion COVID-19 relief and economic stimulus package Democrats passed in 2021, which some economists argue worsened inflation spurred by the pandemic.
“We should be working together on policies to bring us out of this economic quagmire, but the bill we voted on today doubles down on a tried-and-failed tax-and-spend strategy,” Crapo said Sunday in a statement.
“This bill does nothing to address the significant inflation we are facing, or to ease burdens (borne) today by low- and middle-income Americans. Rather, it promises higher taxes, more reckless spending, higher prices, a supersized IRS and prolonged stagflation.”
Sen. Jim Risch, R-Idaho, stated common GOP criticisms of the bill, including that the Congressional Budget Office projects it will have a minimal short-term impact on inflation.
“We haven’t seen this kind of record inflation since Jimmy Carter was president, yet Democrats today chose to pass legislation that will raise taxes and spend hundreds of billions of dollars,” Risch said in a statement Sunday.
“Meanwhile, pharmaceutical innovation will be stifled, the IRS will double in size, and not one thing in the so-called ‘Inflation Reduction Act’ will do anything to address the highest inflation Americans have experienced in 41 years. ”
The bill’s passage represents a major win for Biden, whose economic agenda has been stalled since Sen. Joe Manchin of West Virginia, a key Democratic swing vote, withdrew his support in December from a far bigger package that would have cost $3.5 trillion over a decade.
Even the smaller bill seemed to be doomed as recently as 10 days before it passed when Manchin pulled out of talks with Senate Majority Leader Chuck Schumer, D-N.Y.
Sen. Maria Cantwell, D-Wash., highlighted the bill’s prescription drug provisions and a measure that would cap the cost of insulin for seniors at $35 per dose.
A provision that would have extended that limit on insulin to people with private health insurance was dropped amid Republican opposition after it conflicted with Senate budget rules.
“Washingtonians are paying way too much for prescription drugs. For example, the average cost of insulin more than tripled over the past 10 years to over $735 a month per patient. Now, with the passage of the bill, Medicare beneficiaries are guaranteed to pay no more than $35 a month,” Cantwell said. “Also, this bill will drive down energy costs by implementing cheaper and more efficient energy solutions.”
The bill will now go to the House, where the Democratic majority is expected to pass it later this week .