WASHINGTON (AP) — It’s not as strong as the $4 trillion proposal President Joe Biden once envisioned to rebuild America’s public infrastructure and family support system, and it’s on track to pass the Senate on Sunday. .
The estimated $740 billion package includes capping seniors’ prescription drug costs to $2,000, helping Americans pay for private health insurance, and Democrats’ biggest-ever campaign to fight climate change. There are many party priorities, including what we call investments.
Almost half of the funds, $300 billion, will be used to pay the federal deficit.
It’s all funded in large part by a new corporate tax, including a 15% minimum tax to ensure big companies don’t skip paying taxes at all.
It’s not entirely clear whether the 755-page bill, dubbed the “Reduce Inflation Act of 2022,” will significantly ease inflationary pressures, but it is expected to provide some relief to millions of Americans in medical and other costs. It has been.
The vote was expected to fall in line with party line, with all Senate Democrats in favor and all Republicans against. Once the bill passes the Senate, the House is set to vote on it next week. Here’s what the final package looks like and what it contains:
Reduce prescription drug costs
The bill would allow the Medicare program to negotiate prescription drug prices with drug companies, saving the federal government about $288 billion over a 10-year budget window.
These new revenues will feed back into lower drug costs, including a $2,000 co-payment cap for seniors to purchase prescriptions at pharmacies.
The funds will also be used to provide free vaccinations to seniors, according to the summary document.
Insulin prices for seniors will also be capped at $35 per dose, but the provision to extend the insulin price cap to Americans with private health insurance is inconsistent with Senate budget rules, Republicans removed it from the final bill.
Help pay for health insurance
The bill extends subsidies provided during the COVID-19 pandemic to help some Americans purchase their own health insurance.
Additional aid was set to expire this year under previous pandemic relief. But the bill would allow the assistance to continue for another three years and lower premiums for those who purchase their own health insurance.
“The Largest Investment in Climate Change in U.S. History”
The bill will invest about $375 billion over 10 years in strategies to combat climate change, including investments in renewable energy production and tax rebates for consumers to buy new or used electric vehicles. .
The breakdown includes $60 billion in clean energy manufacturing tax credits and $30 billion in wind and solar production tax credits to boost and support industries that help reduce the country’s dependence on fossil fuels. regarded as a method. The bill also provides tax credits for nuclear power and carbon capture technologies that oil companies such as ExxonMobil have invested millions of dollars in moving forward.
The bill would impose new charges on excess methane emissions from oil and gas drilling, while giving fossil fuel companies access to more leases of federal land and waters.
Additional proposals, later pushed by Arizona Democratic Senator Kirsten Sinema and other Democrats in Arizona, Nevada, and Colorado, included large-scale conservation efforts in the West, including conservation efforts in the Colorado River Basin. was to appoint $4 billion to deal with drought. One million Americans depend on drinking water.
For consumers, tax cuts are an incentive to go green. One is his 10-year consumer tax credit for renewable energy investments in wind and solar. There are tax breaks for buying an electric car, including a $4,000 tax credit for buying a used electric car and a $7,500 tax credit for a new electric car.
Overall, Democrats believe the strategy can put the country on a path to reduce greenhouse gas emissions by 40% by 2030, and “will be the largest climate investment in US history.”
How to pay for all this?
The bill’s biggest revenue driver is a minimum tax rate of 15% for companies with more than $1 billion in annual profits.
It’s a way to crack down on about 200 US companies that avoid paying the standard 21% corporate tax rate, some of which end up paying no tax at all.
The new minimum corporate tax will begin after tax year 2022 and will raise approximately $258 billion over 10 years.
Revenue would have been $313 billion, but Sinema insisted on changing one of the 15% corporate minimums to allow depreciation allowances used in manufacturing. This will cut about $55 billion from total revenue.
To win over cinema, Democrats dropped plans to close tax loopholes rich Americans have long enjoyed. The so-called “carried interest” tax is currently levied on wealthy hedge fund managers and others at a rate of 20%.
For years, the left has tried to raise the effective interest tax rate, which was raised to 37% in the original bill, to suit high-income earners. Cinema did not allow it.
Maintaining tax cuts for the wealthy robs the party of the $14 billion in revenue they expected to help pay for the package.
Instead, the Democrats, with Cinema’s consent, will impose a 1% excise tax on share buybacks and raise about $74 billion over 10 years.
It is also funded by backing the Internal Revenue Service to pursue tax fraud. The bill proposes her $80 billion investment in taxpayer services, enforcement, and modernization, which is expected to generate $203 billion in new revenue.
The bill is in line with Biden’s original promise not to raise taxes on families and businesses earning less than $400,000 a year.
Lower drug prices for the elderly are financed by savings negotiated with Medicare and drug companies.
extra money to pay the deficit
With about $740 billion in new revenue and about $440 billion in new investment, the bill promises to use the difference of about $300 billion to reduce the deficit.
Federal deficits soared during the COVID-19 pandemic. That’s because federal spending surged and tax revenue fell as the country’s economy was rocked by shutdowns, office closures, and other major changes.
The country has seen deficits rise and fall in recent years. But overall federal budgeting is heading for unsustainability, according to the Congressional Budget Office, which released a new report this week on long-term forecasts.
What’s left behind?
This latest package emerged suddenly at the end of July after 18 months of start-and-stop negotiations that left many of Biden’s ambitious goals behind.
Senate Majority Leader Chuck Schumer (DN.Y.) struck a deal with Senator Joe Manchin to revive Biden’s package and slim down to bring West Virginia Democrats back to the negotiating table . Then I drew the rest of the party holdout, Cinema, with some additional changes.
The package remains robust by typical standards, but it’s nowhere near the sweeping Build Back Better program Biden once envisioned.
Congress passed a $1 trillion bipartisan infrastructure bill for highways, broadband and other investments, but while Biden signed into law last year, other key priorities for the president and party were overlooked.
Among them was the continuation of the $300 monthly child tax credit, which was being sent directly to families during the pandemic and is believed to have significantly reduced child poverty.
Also discontinued, for now, are free pre-kindergarten and community college programs, and America’s first paid family leave program, which provides up to $4,000 per month for births, deaths, and other essential needs.
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Associated Press writer Matthew Daly contributed to this report.
