WASHINGTON (AP) — President Joe Biden arrived at the White House promising to “build back” America, and legislation he signed Tuesdaydelivers a slimmer, though not insignificant, version of that once sweeping idea.
Approved by the divided Congress, the bill brings the biggest investment ever in the U.S. to fight climate change. Also in the legislation is a $2,000 cap on out-of-pocket prescription drug costs for Medicare recipients as well as a new 15% corporate minimum tax to ensure big businesses pay their share.
And billions will be left over to pay down federal deficits.
All told, the Democrats’ “Inflation Reduction Act” may not do much to immediately tame inflationary price hikes. But the package, an election year turnaround after loftier versions collapsed, will touch countless American lives and secure longtime party goals.
Democrats alone supported the package, as Republicans lined up against it. Republicans deride the 730-page bill as big government overreach and point particular criticism at its $80 billion investment in the IRS to hire new employees and go after tax scofflaws.
Voters will be left to sort it out in the November elections, when control of Congress will be decided.
Not as robust as Biden’s initial ideas to rebuild America’s public infrastructure and family support systems, here’s what’s in the estimated $740 billion package — made up of $440 billion in new spending and $300 billion toward easing deficits.
LOWER PRESCRIPTION DRUG COSTS
Launching a long-sought goal, the bill would allow the Medicare programto negotiate some prescription drug prices with pharmaceutical companies, saving the federal government some $288 billion over the 10-year budget window.
The result is expected to lower costs for older adults on medications, including a $2,000 out-of-pocket cap for older adults buying prescriptions from pharmacies.
The revenue raised would also be used to provide free vaccinations for seniors, who now are among the few not guaranteed free access, according to a summary document.
Seniors would also have insulin prices capped at $35 a month.
HELP PAYING FOR HEALTH INSURANCE
The bill would extend the subsidies provided during the COVID-19 pandemic to help some Americans who buy health insurance on their own.
Under earlier pandemic relief, the extra help was set to expire this year. But the bill would allow the assistance to keep going for three more years, lowering insurance premiums for some 13 million people who are purchasing their own health care policies through the Affordable Care Act.
BIGGEST U.S. INVESTMENT ‘BY FAR’ IN CLIMATE CHANGE
The bill would infuse nearly $375 billion over the decade in climate change-fighting strategies that Democrats believe could put the country on a path to cut greenhouse gas emissions 40% by 2030, and “would represent the single biggest climate investment in U.S. history, by far.”
For consumers, that means tax rebates to buy electric vehicles — $4,000 for used vehicle purchase and up to $7,500 for new ones, eligible to households with incomes of $300,000 or less for couples, or single people with income of $150,000 or less.
Not all electric vehicles will fully qualify for the tax credits, thanks to requirements that component parts be manufactured and assembled in the U.S. And pricier cars costing more than $55,000 and SUVs and trucks priced above $80,000 are excluded.
There’s also tax breaks for consumers to go green. One is a 10-year consumer tax credit for renewable energy investments in wind and solar.
For businesses, the bill has $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 boost and support the industries that can help curb the country’s dependence 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 combat a mega-drought in the West, including conservation efforts in the Colorado River Basin, which nearly 40 million Americans rely on for drinking water.
HOW TO PAY FOR ALL OF THIS?
One of the biggest revenue-raisers 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 clamp down on some 200 U.S. companies that avoid paying the standard 21% corporate tax rate, including some that end up paying no taxes at all.
The new corporate minimum tax would kick in after the 2022 tax year and raise more than $258 billion over the decade.
There will also be a new 1% excise tax imposed on stock buybacks, raising some $74 billion over the decade.
Savings from allowing Medicare’s negotiations with the drug companies is expected to bring in $288 billion over 10 years, according to the non-partisan Congressional Budget Office.
The bill sticks with Biden’s original pledge not to raise taxes on families or businesses making less than $400,000 a year.
Yet money is also raised by boosting the IRS to go after tax cheats. The bill proposes an $80 billion investment in taxpayer services, enforcement and modernization, which is projected to raise $203 billion in new revenue — a net gain of $124 billion over the decade.
Sinema was instrumental in doing away with other tax proposals and shaping the final plan.
EXTRA MONEY TO PAY DOWN DEFICITS
With some $740 billion in new revenue and around $440 billion in new investments, the bill promises to put the difference of about $300 billion toward deficit reduction.
Federal deficits spiked during the COVID-19 pandemic when federal spending soared and tax revenues fell as the nation’s economy churned through shutdowns, closed offices and other massive changes.
The nation has seen deficits rise and fall in recent years. But overall federal budgeting is on an unsustainable path, according to the Congressional Budget Office, which recently put out a new report on long-term projections.
WHAT’S LEFT BEHIND?
The package, nowhere near the sweeping Build Back Better program Biden once envisioned, remains a sizable undertaking and, along with COVID-19 relief and the GOP 2017 tax cuts, is among the more substantial bills from Congress in years.
While Congress did pass and Biden signed into law a $1 trillion bipartisan infrastructure bill for highways, broadband and other investments that was part of the White House’s initial vision, the Democrats’ other big priorities have slipped away.
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 have provided up to $4,000 a month for births, deaths and other pivotal needs. Also allowed to expire is the enhanced child care credit that was providing $300 a month during the pandemic.
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Associated Press writer Matthew Daly contributed to this report.
Scientists say new climate law is likely to reduce warming
WASHINGTON (AP) — Massive incentives for clean energy in the U.S. law signed Tuesday by President Joe Biden should reduce future global warming “not a lot, but not insignificantly either,” according to a climate scientist who led an independent analysis of the package.
Even with nearly $375 billion in tax credits and other financial enticements for renewable energy in the law, the United States still isn’t doing its share to help the world stay within another few tenths of a degree of warming, a new analysis by Climate Action Tracker says. The group of scientists examines and rates each country’s climate goals and actions. It still rates American action as “insufficient” but hailed some progress.
“This is the biggest thing to happen to the U.S. on climate policy,” said Bill Hare, the Australia-based director of Climate Analytics which puts out the tracker. “When you think back over the last decades, you know, not wanting to be impolite, there’s a lot of talk, but not much action.”
This is action, he said. Not as much as Europe, and Americans still spew twice as much heat-trapping gases per person as Europeans, Hare said. The U.S. has also put more heat-trapping gas into the air over time than any other nation.
Before the law, Climate Action Tracker calculated that if every other nation made efforts similar to those of the U.S., it would lead to a world with catastrophic warming — 5.4 to 7.2 degrees (3 to 4 degrees Celsius) above pre-industrial times. Now in the best case scenario, which Hare said is reasonable and likely, U.S. actions, if mimicked, would lead to only 3.6 degrees (2 degrees Celsius) of warming. If things don’t work quite as optimistically as Hare thinks, it would be 5.4 degrees (3 degrees Celsius) of warming, the analysis said.
Even that best case scenario falls short of the overarching internationally accepted goal of limiting warming to 2.7 degrees warming (1.5 degrees Celsius) since pre-industrial times. And the world has already warmed 2 degrees (1.1 degrees Celsius) since the mid-19th century.
Other nations “who we know have been holding back on coming forward with more ambitious policies and targets” are now more likely to take action in a “significant spillover effect globally,” Hare said. He said officials from Chile and a few Southeast Asian countries, which he would not name, told him this summer that they were waiting for U.S. action first.
And China “won’t say this out loud, but I think will see the U.S. move as something they need to match,” Hare said.
Scientists at the Climate Action Tracker calculated that without any other new climate policies, U.S. carbon dioxide emissions in 2030 will shrink to 26% to 42% below 2005 levels, which is still short of the country’s goal of cutting emissions in half. Analysts at the think tank Rhodium Group calculated pollution cuts of 31% to 44% from the new law.
Other analysts and scientists said the Climate Action Tracker numbers makes sense.
“The contributions from the U.S. to greenhouse gas emissions are huge,” said Princeton University climate scientist Gabriel Vecchi. “So reducing that is definitely going to have a global impact.”
Samantha Gross, director of climate and energy at the Brookings Institution, called the new law a down payment on U.S. emission reductions.
“Now that this is done, the U.S. can celebrate a little, then focus on implementation and what needs to happen next,” Gross said.
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Follow Seth Borenstein on Twitter at @borenbears
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