WASHINGTON – House Democrats on Friday passed a landmark bill to lower health care costs, combat climate change and cut budget deficits by raising taxes on corporations, giving President Joe Biden and his congressional allies a much-needed win as the midterm election season heats up.
The Inflation Reduction Act, which passed the Senate with only Democratic votes on Sunday, aims to cut prices of a limited number of prescription drugs by letting Medicare negotiate with drugmakers, and extends pandemic-era health insurance subsidies for two more years. It uses tax incentives to boost low-carbon energy and transportation, paying for it all with taxes on large corporations that are projected to cut federal deficits by $300 billion over a decade.
“Today is a historic day for American families, our seniors, and our economy,” Rep. Suzan DelBene, a Democrat from Medina, Washington, who leads the moderate New Democrat Coalition, said in a statement. “To anyone who says that Congress cannot do big or good things anymore, we proved them wrong today, again.”
Despite its name, economists generally agree the bill will do little to stem rising prices spurred by pandemic-related supply problems and federal stimulus spending, but it should reduce what many Americans pay for health care. In addition to lowering prescription drug costs and keeping insurance rates down, it caps costs for seniors at $35 per dose of insulin and $2,000 in out-of-pocket spending each year.
It invests $369 billion in tax credits and incentives to encourage companies and consumers to adopt more climate-friendly energy sources and modes of transportation, as well as more energy-efficient home appliances such as heat pumps. The bill also expands oil and gas leasing on federal lands, a measure sought by moderate Sen. Joe Manchin of West Virginia that rankled the party’s left flank.
Those provisions fall far short of what progressives like Rep. Pramila Jayapal have sought, but the Seattle Democrat said in a news conference Friday that the Congressional Progressive Caucus, which she leads, would support the bill. It also will continue to push for Democratic priorities that were stripped from an earlier, far bigger version of the legislation to win the support of Manchin and fellow centrist Sen. Kyrsten Sinema of Arizona, she said.
“This landmark legislation marks the largest-ever federal investment in climate action,” Jayapal said, before adding that the Congressional Progressive Caucus is “heartbroken to see investments in care, housing, immigration, workforce and more left on the cutting room floor.”
Alyssa Macy, CEO of the Washington Environment Council and Washington Conservation Voters, hailed the bill’s climate provisions in a statement.
“The investments in this law will accelerate Washington’s work to act now on decarbonizing equitably and rapidly,” she said. “This should signal a new beginning where we tap our ingenuity, empower diverse expertise, and invest in environmental justice to scale up how we tackle the climate crisis.”
Unlike the $3.5 trillion Build Back Better Act pushed by Biden in 2021, which would have added to the federal debt, the pared-down legislation would pay for itself and reduce deficits by about $300 billion over 10 years, according to an estimate by the nonpartisan Congressional Budget Office. The new revenue would come mainly from taxes on large companies, including a 15% minimum tax rate aimed at corporations that often pay little or no taxes.
Maya MacGuineas, president of the Committee for a Responsible Federal Budget, was a harsh critic of the Build Back Better Act but cheered the slimmed-down bill’s passage in a statement Friday.
“With today’s passage of the Inflation Reduction Act, lawmakers made an important pivot from reckless to responsible budgeting,” she said. “This bill started out as a plan filled with gimmicks that would add massively to the national debt and ended as one to reduce the deficit, help the Federal Reserve push against inflation, and serve as a model for how legislation can improve with real effort and leadership.”
Sticking to a Biden campaign promise, the bill doesn’t raise taxes on anyone who earns less than $400,000 a year. But Republicans, who universally opposed the bill, argued it would effectively raise taxes on all Americans because corporations will pass on higher taxes to consumers in the form of price hikes. Sen. Mike Crapo of Idaho, the top Republican on the Senate Finance Committee, laid out that argument in an Aug. 3 news conference.
“Technically, it’s not raising their tax rates,” Crapo said, referring to middle-class taxpayers. “It is raising taxes, and they are paying them. … They will be the ones who incur the burden of these taxes.”
Rep. Cathy McMorris Rodgers, R-Spokane, put that argument in less nuanced terms in a statement after Friday’s vote.
“Democrats are doubling down on a reckless tax and spending spree that has led to the out-of-control inflation, high gas and energy prices, and climbing health care costs that we see today,” she said. “This $700 billion socialist agenda will only bring more pain to hardworking people by raising taxes and costs across every income level all so Democrats and President Biden can fund their agenda and seek more federal command and control in people’s lives.”
Rep. Russ Fulcher, a Republican who represents North Idaho, said in a statement the Inflation Reduction Act “is as deceptively named as it is dangerous to our country’s economic well-being,” and accused Democrats of “asking the middle class and businesses to pay” for federal spending “with hundreds of billions in new taxes.”
In a statement, Central Washington GOP Rep. Dan Newhouse called it “inconceivable” that Democrats “can stand behind a package that is so clearly detrimental to the American people while lying about the climate and economic benefits it will provide.”
The bill’s 15% minimum tax applies only to corporations with at least $1 billion in annual revenue, which limits the requirement to about 200 of the country’s biggest companies. It also adds a 1% excise tax on corporate stock buybacks and gives $80 billion to the Internal Revenue Service, which has seen its budget and staffing fall by about 20% over the past decade, to help crack down on tax evasion by big companies and wealthy Americans.
Republicans have also criticized the provision that lets Medicare negotiate lower prices with pharmaceutical companies, who have long argued the relatively exorbitant prices Americans pay for prescription drugs – about twice what people in comparable countries pay, according to the Kaiser Family Foundation – allow drugmakers to develop new medications.
Five former Treasury secretaries who served in the administrations of Presidents Bill Clinton, George W. Bush and Barack Obama pushed back on that GOP rhetoric in a statement Aug. 3, saying the bill “is financed by prudent tax policy that will collect more from top-earners and large corporations.”
“Taxes due or paid will not increase for any family making less than $400,000/year,” the former Treasury secretaries wrote. “And the extra taxes levied on corporations do not reflect increases in the corporate tax rate, but rather the reclaiming of revenue lost to tax avoidance and provisions benefiting the most affluent.”
The bill will now go to Biden’s desk to be signed into law.
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