Now that Senator Joe Manchin has signaled his support, the Inflation Reduction Act of 2022 is back on track in Congress. More than a short-term response to inflation, however, this bill has the potential to become the boldest move the US has ever made against climate change and will bring real benefits to Minnesotans. Assuming, of course, that he survives the votes and procedural challenges in both chambers with little or no support from the Republicans.
The very title of “Inflation Reduction Act” is really a bit of political theater; The bill is indeed a complex package of new spending and tax credits for energy and climate initiatives, combined with some healthcare investments, funded by tax reforms and drug cost savings for an estimated net positive return of over $ 300 billion in the next decade.
On the climate / energy side there are extended credits for clean energy production, including biofuels, subsidies for electric vehicles, home energy improvement discounts, and support for green energy technology produced in the United States such as solar panels and batteries . A new “incentive program” would be created to impose taxes on methane emissions related to oil and gas production, one of the main factors contributing to the pollution of climate change.
As for health care, there is a major investment in the Affordable Care Act to reduce the cost of health insurance for those who shop in the market. A provision that allows the federal government – and Medicare in particular – to negotiate drug prices with manufacturers should save $ 266 billion alone. Another would limit direct drug costs for seniors to $ 2,000 per year.
All of this would be paid for through tax reforms that target corporations, tax evaders and loopholes. It is estimated that $ 440 billion in taxes due are not paid annually, most of which is owned by wealthy Americans. The bill would increase the appropriations to the IRS to increase enforcement; the non-party Congressional Budget Office has estimated a 250% return on every dollar invested in increased enforcement. A minimum tax of 15% for companies with over $ 1 billion in profits would generate over $ 300 billion, ensuring that the major energy, tech and retail giants pay their fair share. It would also close the carry interest loophole, which requires investment managers to treat their income as income, rather than capital gains taxed at lower rates. Proponents of the bill say those earning less than $ 400,000 a year would see no direct tax hikes.
So what does this have to do with inflation?
Since short-term interest rates or prices go up, not that much. This is long-term legislation: investment and savings data are for a period of ten years. According to a recent Forbes article, if the bill’s climate and energy provisions “would reduce emissions by 37% -41% by 2030 compared to 2003 levels” and “stimulate an economic boom, increasing GDP.” by almost 1% in 2030 “. The same analysis concluded that the bill would generate about 1.5 million new jobs in the manufacturing, construction and services sectors. Tackling climate change may not pay off in the short term, but it will definitely help us avoid rising costs in the future as we address the impact of climate change on everything from weather conditions to supply chains to agriculture.
But spending on energy and health care also makes up a significant part of the monthly family budget. Moving to climate-friendly home green energy and lowering the costs of insurance and prescription drugs would undoubtedly have a direct impact on American households. Home energy improvement subsidies – insulation, better windows, more efficient HVAC – would be particularly welcome here in Minnesota, where heating costs are high. What about electric vehicles? Ask any friend who no longer has to buy gas to go to work how good it can be.
Headlines proclaiming “the biggest climate move ever” were slow in coming. It is possible that the law on reducing inflation could really be that and more: a move to make the tax system fairer and fairer, to improve access to health care, and also to reduce the costs of prescription drugs.
The bill just needs a better name. Something like “Protecting the future of our grandchildren and the health of the elderly while tax evaders pay their fair share” would work.
– This is the opinion of Derek Larson, a member of the Times Writers Group. He teaches history and environmental studies at the College of St. Benedict and St. John’s University and his column is published monthly. He welcomes your comments at [email protected]