Biden signs tax, health and climate bill into law

  • In Business
  • 2022-08-16 23:05:09Z
  • By BBC
Image shows President Joe Biden
Image shows President Joe Biden  

US President Joe Biden has signed a $700bn (£579bn) bill that raises taxes mostly on the wealthy and aims to fight healthcare costs and climate change.

The act includes measures to make good on decades of congressional promises to curb the price of prescription drugs.

The final version is more modest in scope than the $3.5tn package first envisaged by Democrats.

A flagship of Mr Biden's agenda, the bill could provide a boost ahead of the mid-term elections.

Voters casting their ballots in November will decide whether Mr Biden's Democrats retain control of Congress for two more years.

The president hailed the bill as he signed it on Tuesday as the "final piece" of his long-stalled domestic agenda.

But key economic claims about the legislation have been under scrutiny.

Despite being called the Inflation Reduction Act (IRA), the package will have zero measurable impact on inflation, according to an analysis by the Penn Wharton Budget Model, a group of economists and data scientists at University of Pennsylvania.

The bill sets a minimum 15% tax for corporations, and Democrats have pledged it will entail no tax hikes for those with incomes below $400,000 a year.

But an analysis of the legislation by the nonpartisan Congressional Budget Office (CBO) said Americans earning less than $400,000 a year would end up paying an additional $20bn in taxes.

The bill includes about $46bn for the Internal Revenue Service (IRS) to hire tens of thousands more tax agents.

Republican Senate leader Mitch McConnell said the legislation "means higher taxes, higher energy bills, and aggressive IRS audits".

The package invests $375bn to fight climate change - the most significant federal investment in history in the issue.

The bill is projected to lower US emissions by up to 42% by 2030, compared with the current US trajectory, which would lower emissions by up to 35%, according to an analysis by the Rhodium Group, a consultancy.

It does not require companies to reduce their emissions, but includes tax incentives for firms to invest in renewable energy and rebates for people who buy electric cars or invest in energy-efficient home improvements.

"The money, while it seems big, once you start dividing that up by 50 [states] and dividing that up by households, it doesn't necessarily touch a ton of folks," said Panama Bartholomy, director of the Building Decarbonization Coalition, which lobbies for greener construction.

Brett Reinford, 36, a dairy farmer from Pennsylvania, told the BBC he was interested in using the funding to help his family's cow farm reduce its methane emissions.

Brett Reinford
Brett Reinford  

"If we can get some support from the government, it makes a lot of these projects make more sense economically," he said.

But many of its changes will not go into effect for at least two more years, leaving questions about how the new programmes will work.

The tax credit for electric vehicles, for example, comes with price caps that disqualify nearly every option currently on the market, according to the car industry.

It is also unclear how the legislation's emissions targets will be affected by such variables as the price of petrol, or local opposition to wind and solar projects.

In a major breakthrough, the package allows the government to negotiate lower prices for some prescription medicines provided under its Medicare health insurance programme for those aged over 65.

That is expected to save hundreds of billions of dollars over the next decade, according to estimates from the Congressional Budget Office.

  • ANALYSIS: US climate win masks scale of warming challenge

  • BACKGROUND: Why are prices rising and what is the inflation rate?

  • CONTEXT: Biden is passing laws - but is he winning hearts?

Several ambitious proposals were scrapped from the bill in the final weeks, including closing a tax loophole for private equity firms and capping the price of the diabetes medicine insulin.

The outcome disappointed some such as 21-year-old Trevor Milton.

The construction worker in Washington, who was diagnosed with Type 1 diabetes when he was 12, pays about $210 a month for insulin, which he needs to help regulate his blood sugar levels.

"I always find it dumbfounding that I have to pay so much for this medicine just to keep me alive," he told the BBC.


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