WASHINGTON (AP) — Not as strong as the $4 trillion proposal President Joe Biden once envisioned to rebuild America’s public infrastructure and family support systems, Democrats’ compromise on health care, climate change and deficit reduction strategies remains a major undertaking and on track for a Senate vote on Sunday.
The estimated $740 billion package is full of partisan priorities — including capping prescription drug costs at $2,000 out-of-pocket for seniors, helping Americans pay for private health insurance and what Democrats are calling the most substantial investment in history to fight climate change .
Almost half of the money, $300 billion, will go toward paying down federal deficits.
It’s all largely paid for with new corporate taxes, including a minimum tax of 15% on big companies to ensure they don’t miss out on paying any taxes at all.
Called the “Inflation Reduction Act of 2022,” it’s far from clear that the 755-page bill will substantially reduce inflationary pressures, though millions of Americans are expected to see some relief in health care and other costs.
The votes are expected to fall along party lines, with all Senate Democrats in favor and all Republicans opposed. Once the bill passes the Senate, the House is expected to vote next week. Here’s a look at what’s inside and outside the final package.
LOWER PRESCRIPTION DRUG COST
Kicking off a long-sought goal, the bill would authorize the Medicare program to negotiate prescription drug prices with drug companies, saving the federal government about $288 billion over the 10-year budget.
This new revenue will feed back into lower costs for seniors for drugs, including a $2,000 out-of-pocket cap for seniors who buy prescriptions from pharmacies.
The money will also be used to provide free vaccinations for the elderly, who are now among the few without guaranteed free access, according to a summary document.
Seniors would also have insulin prices capped at $35 a dose, although a provision to extend that insulin price cap to Americans with private health insurance did not meet Senate budget rules, and Republicans removed it from the final bill.
HELP PAYING FOR HEALTH INSURANCE
The bill would expand subsidies provided during the COVID-19 pandemic to help some Americans who buy health insurance on their own.
Under previous pandemic relief, additional aid was due to expire this year. However, the bill would allow the assistance to continue for three more years, lowering premiums for people who buy their own health care policies.
“THE LARGEST INVESTMENT IN CLIMATE CHANGE IN US HISTORY”
The bill would invest nearly $375 billion over the decade in strategies to combat climate change, including investments in renewable energy generation and tax credits for consumers to buy new or used electric vehicles.
It breaks down $60 billion in clean energy production tax credits and $30 billion in wind and solar production tax credits, which are seen as ways to boost and support industries that can help reduce the nation’s reliance on fossil fuels. The bill also provides tax credits for nuclear power and carbon capture technology that oil companies such as Exxon Mobil have invested millions of dollars to promote.
The bill would impose a new end to excessive 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 set aside $4 billion to fight a major drought in the West, including conservation efforts in the Colorado River Basin , which nearly 40 million Americans rely on for drinking water.
For consumers, there are tax breaks as incentives to go green. One is a 10-year consumer tax credit for renewable energy investments in wind and solar power. There are tax breaks for buying electric vehicles, including a tax credit of $4,000 for buying used electric vehicles and $7,500 for new ones.
Overall, Democrats believe the strategy could put the country on a path to reduce greenhouse gas emissions by 40 percent by 2030 and “would represent the largest climate investment in U.S. history by far.”
HOW TO PAY FOR ALL THIS?
The biggest revenue-raising driver in the bill is the new 15% minimum tax on companies that earn more than $1 billion in annual profits.
It’s a way to squeeze some 200 US companies that avoid paying the standard 21% corporate tax, including some that end up paying no taxes at all.
The new minimum corporate tax will kick in after the 2022 tax year and raise about $258 billion over the decade.
Revenue would have been $313 billion, but Sinema insisted on a change to the corporate minimum of 15 percent, allowing a depreciation deduction used by manufacturing industries. That cuts about $55 billion from total revenue.
To win over Sinema, Democrats shelved plans to close a tax loophole long enjoyed by the wealthiest Americans — so-called “carried interest,” which under current law taxes wealthy hedge fund managers and others at a rate of 20 %.
The left has tried for years to boost the proposed tax rate, which rose to 37% in the original bill, more in line with higher earners. Cinema would not allow it.
Keeping the tax break for the wealthy deprives the party of $14 billion in revenue it was relying on to pay for the package.
In its place, Democrats, with Sinema’s nod, would impose a 1 percent excise tax on stock purchases, raising about $74 billion over the decade.
The money is also raised to help the Internal Revenue Service crack down on tax fraud. 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.
The bill sticks to Biden’s original pledge not to raise taxes on families or businesses making less than $400,000 a year.
Lower drug prices for seniors are paid for with savings from Medicare’s negotiations with drug companies.
ADDITIONAL MONEY TO PAY DEFICIENTS
With about $740 billion in new revenue and about $440 billion in new investments, the bill promises to make up about $300 billion in deficit reduction.
Federal deficits have ballooned during the COVID-19 pandemic, when federal spending soared and tax revenues fell as the nation’s economy scrambled through shutdowns, office closures and other sweeping changes.
The nation has seen deficits rise and fall in recent years. However, the overall federal budget is on an unsustainable path, according to the Congressional Budget Officewhich published a new report this week on long-term forecasts.
WHAT WAS LEFT BEHIND?
This latest package emerged out of nowhere in late July after 18 months of start-stop negotiations leaving behind many of Biden’s most ambitious goals.
Senate Majority Leader Chuck Schumer, D-N.Y., struck a deal with Sen. Joe Manchin to revive Biden’s package, trimming it to bring the West Virginia Democrat back to the negotiating table. They then designed Sinema, the remaining party, with additional changes.
The package remains strong by standard standards, but nowhere near the sweeping Build Back Better program that Biden once envisioned.
While Congress did pass a bipartisan $1 trillion infrastructure bill for highways, broadband and other investments that Biden signed last year, the president’s and the party’s other top priorities have fallen by the wayside.
Among them is the continuation of a $300 monthly child tax credit that sent money directly to families during the pandemic and is widely believed to have reduced child poverty.
Also 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 basic needs.
Associated Press writer Matthew Daly contributed to this report.