Democrats in Congress have had to scale back their legislative ambitions since last year, but the Inflation Reduction Act, passed by the House on Friday and signed by President Joseph R. Biden Jr. on Tuesday, is still a substantial piece of legislation that will make big investments in the environment and health care, and increase taxes on some key groups.
Energy and climate Health care*These are rough estimates because of changes to the drug price provisions in the bill after cost and savings estimates were released. Savings from the drug price negotiation policy may end up being lower, and the savings from limits on drug price increases are unofficial estimates based on an analysis by Don Schneider, a former chief economist of the House Ways and Means Committee. Figures are in billions and over 10 years.
The bill includes policies lowering the prices of prescription drugs; increasing the generosity of Medicare benefits; and encouraging the development of renewable energy and reducing the impact of climate change. It would also raise taxes on some corporations and bolster the ability of the Internal Revenue Service to crack down on wealthy tax evaders. It would lower the federal deficit, though modestly. The bill includes last-minute changes requested by Senator Kyrsten Sinema, Democrat of Arizona, the final holdout among her party’s 50 senators. Democratic leaders agreed to remove a tax on some wealthy hedge fund managers and private equity executives, and to include $4 billion in drought funding for her state. The table below describes everything in the bill, including the prices:
*These are rough estimates because of changes to the drug price provisions in the bill after cost and savings estimates were released. Savings from the drug price negotiation policy may end up being lower, and the savings from limits on drug price increases are unofficial estimates based on an analysis by Don Schneider, a former chief economist of the House Ways and Means Committee.
But if the current bill includes a lot — in spending, new taxes and policies — it also omits a lot of the Democrats’ original ambitions. Missing is an entire set of family policies that were in a bill passed by the House last year, like a generous child tax credit and paid family leave. Certain health policies, such as an expansion of Medicaid to give more low-income adults health insurance, have been removed to pare down the bill’s cost. And though the climate policies are the most expansive passed by any Congress, they are more modest than those included in earlier versions of the legislation. The current bill includes clean electricity incentives that are comparable in size to those in a version passed by the House last year. But it scales back spending in almost every other category, from transportation to climate resilience. Some proposed investments from earlier versions — like those for lead remediation, work force development such as a Civilian Climate Corps, and electric bicycle tax credits — did not make it into the new text. The one major exception is manufacturing: Compared with previous versions of the bill, this legislation marks a significant increase in grants, loans and tax credits to manufacture clean energy technology domestically. But it also pairs new climate spending with several major concessions to the fossil fuel industry at the request of Senator Joe Manchin III of West Virginia, whose support was necessary to advance the bill. Here’s how the legislation compares with the much larger social safety net and climate bill passed by the House in November, often referred to as Build Back Better.
| Spending and tax cuts | Inflation Reduction Act In billions | Build Back Better In billions |
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