It's been one year since the Biden administration passed the Inflation Reduction Act, a flagship policy that includes hundreds of billions of dollars to tackle climate change, lower prescription drug prices, and improve taxpayer compliance.
President Joe Biden set out this week to tour the Southwest to promote the IRA policy changes aimed at confronting climate change and creating new jobs.
INFLATION TICKED UP TO 3.2% IN JULY IN SETBACK FOR BIDEN AND FED
However, some companies and industries directly affected by the numerous provisions in the IRA have heavily pushed back on the Biden administration's hefty legislation. Every single House and Senate Republican voted against the IRA.
“One year ago the so-called Inflation Reduction Act passed a Democrat-run House and gave hundreds of billions in taxpayer subsidies to climate hoax special interests,” Rep. Bob Good (R-VA) told the Washington Examiner. “Meanwhile, family budgets are still strained, small businesses are still hurting, and the Federal Government remains weaponized against the American people.”
Climate
The IRA was the largest climate measure in U.S. history, including massive clean energy tax credits to boost the transition to electric vehicles and expand renewable energy production.
The legislation prompted investment in a massive buildout of battery and EV manufacturing across the U.S., producing major results this past year. EV sales in the first quarter of 2023 increased by 25% compared to the same period last year, according to an analysis from the International Energy Agency. EV sales appear to be rising due to price cuts by automakers and IRA tax credits worth up to $7,500 for consumers for vehicles purchased from 2023 to 2032.
The IRA allocated $6 billion to further clean-vehicle transition in the U.S. by advancing loans to create more clean vehicles and the components needed for them. The Biden administration also gave funding to tribal, state, and local governments to deploy clean heavy-duty vehicles, "especially in nonattainment areas,” according to a White House statement.
The policy places emission mandates on the gas and oil industry, projecting to reduce U.S. net greenhouse gas emissions by 32%-42% by 2030, per the Rhodium Group.
The Environmental Protection Agency received more than $41 billion dollars from the IRA, some of which were used to open grant competitions this summer. The EPA told the Washington Examiner that $27 billion in funding went toward the Greenhouse Gas Reduction Fund, $7 billion for residential solar, and $20 billion to build a national-scale clean financing network.
“In year two, EPA will continue to move expeditiously to award funds and provide support to communities, recognizing the urgency for climate action, environmental justice, and delivering on the transformative potential of the IRA,” an EPA spokesperson told the Washington Examiner.
Some electric groups have pushed back against Biden’s rigorous climate agenda, calling emission regulations and new power plant standards from the EPA unrealistic.
The Edison Electric Institute said, “Electric companies are not confident that the new technologies EPA has designated to serve as the basis for proposed standards for new and existing fossil-based generation will satisfy performance and cost requirements on the timelines that EPA projects.” The EPA responded by saying the IRA subsidies make the proposals cost-effective.
Prescription drug costs
The IRA includes multiple provisions to create lower prescription drug costs for those using Medicare, as well as decrease drug spending by the government.
Under the Medicare Prescription Drug Inflation Rebate Program, manufacturers will have to pay a rebate to Medicare if a drug's price increase exceeds the rate of inflation. The program went into effect in October 2022.
“The research announced today reinforces that President Biden’s new law is helping control drug spending while making sure seniors and people with disabilities can afford the medications they need,” Xavier Becerra, the Health and Human Services secretary, said in a June press release stating the IRA is currently lowering out-of-pocket Part B drug costs.
Another provision, the Drug Price Negotiation Program, allows Medicare to negotiate directly with drug companies to decrease the price of the most expensive single-source, brand-name Medicare Part B and Part D drugs. The Congressional Budget Office estimated Medicare savings over 10 years will amount to $98.5 billion from drug negotiation measures.
The Pharmaceutical Research and Manufacturers of America, the most influential lobbying group in the industry, and two other organizations said in June they are suing the government to block the provisions. The negotiated prices for certain drugs covered under Part D are expected to be available in 2026, with drugs that fall under Part B to be available in 2028.
The pharmaceutical industry claims the provisions will do very little to lower the cost of healthcare and will have an adverse effect by leading to fewer new drugs caused by forcing companies to lower prices.
Taxes
The IRA seeks to hold some of the most profitable companies accountable by requiring corporations that have at least $1 billion net income or profits to pay a minimum tax rate of 15%, called a book minimum tax. The tax base will be on the reported earnings they give to shareholders on financial statements. Effects of the book tax are not yet seen because it will apply to tax years starting after Dec. 31, 2022.
Major companies such as Amazon, Tesla, Ford, and General Motors are likely to see the highest tax increases in decades. In 2021, 19 companies in the Fortune 100 paid low or no taxes on their 2021 earnings, according to the Center for American Progress.
The U.S. Chamber of Commerce and business organizations around the nation strongly opposed the IRA, claiming the taxes would “discourage investment and undermine economic growth and price controls that would limit American innovation.”
The Business Roundtable, an association of lobbyists whose members include CEOs of major U.S. companies, also condemned the IRA last year.
CEO Joshua Bolten said in a statement that the organization supports the climate policies in the IRA, “However, the proposed book minimum tax would, among other things, suppress domestic investment when increased investment is needed to spur a strong recovery. This tax hike would also undermine the competitiveness of America’s exporters.”
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Bolten continued to say the taxes would undermine bipartisan incentives that are already working to encourage capital investment.
“Oh — and Bidenflation is costing households thousands of dollars,” Good said. “Democrat policies continue to make everything worse, and hurt average Americans.”