Not as forceful as the proposals President Joe Biden once envisioned to rebuild America’s public infrastructure and household support system, Democrats’ compromises on health care, climate change and deficit reduction strategies remain a tall order.
An estimated $740 billion package passed by the Senate on Sunday and headed to the House of Representatives is chock-full of party priorities. These include capping the cost of prescription drugs for seniors to $2,000, helping Americans pay for private health insurance and what Democrats say is the largest investment in climate change history at about $375 billion over a decade.
Nearly half of the funds raised ($300 billion) will be used to pay the federal deficit.
This is largely paid for through the new corporate tax, including a 15% minimum tax on large corporations to ensure they don’t skip any taxes.
It’s unclear how much the 755-page bill, dubbed the “Reducing Inflation Act of 2022,” will significantly ease inflationary pressures, although millions of Americans are expected to experience relief in health care and other costs.
In the 50-50 Senate, where voting was strictly partisan, with all Democrats in favor and all Republicans against, Vice President Kamala Harris provided the tie-breaker by a 51-50 vote. The House of Representatives is expected to vote on Friday.
Take a look at what’s in the final package:
Reduce prescription drug costs
The bill lays out a long-sought goal that would allow Medicare plans to negotiate prescription drug prices with drug companies, saving the federal government about $288 billion over a 10-year budget window.
The new revenue will be used to lower the cost of medication for seniors, including a $2,000 out-of-pocket cap for seniors buying prescriptions from pharmacies.
The money will also be used to provide free vaccinations for the elderly, who are now one of the few not guaranteed free vaccinations, a summary document shows.
Insulin prices for seniors will also be capped at $35 per dose. A provision extending an insulin price cap to Americans with private health insurance falls short of Senate budget rules, and Republicans removed it from the final bill.
Help pay for health insurance
The bill would expand subsidies provided during the COVID-19 pandemic to help some Americans who buy their own health insurance.
The additional help is set to expire this year under earlier pandemic relief. But the bill would allow aid to continue for another three years, lowering insurance premiums for people who buy their own health care policies.
“The largest investment in climate change in U.S. history”
The bill would invest nearly $375 billion over a decade in climate change strategies, including investing in renewable energy production and providing tax rebates for consumers buying new or used electric vehicles.
It’s broken down to include a $60 billion clean energy manufacturing tax credit and a $30 billion wind and solar production tax credit, seen as a way to boost and support industries that help curb the country’s reliance on fossil fuels . The bill also provides tax credits for nuclear power and carbon capture technologies that oil companies such as Exxon Mobil invest millions of dollars to advance.
The bill would impose new fees on excess methane emissions from oil and gas drilling, while giving fossil fuel companies more leases on federal lands and waters.
A latest increase pushed by Arizona Democratic Sen. Kyrsten Sinema and other Democrats in Arizona, Nevada and Colorado would earmark $4 billion to fight a megadrought in the West, including conservation efforts in the Colorado River Basin , of which nearly 40 million Americans depend on drinking water.
For consumers, tax cuts can motivate them to go green. One of them is a 10-year consumer tax credit for renewable energy investments in wind and solar. There are tax deductions for electric vehicle purchases, including a $4,000 tax credit for the purchase of a used electric vehicle and a $7,500 tax credit for a new car.
All told, Democrats believe the strategy could put the United States on a path to reducing greenhouse gas emissions by 40 percent by 2030, and “would represent the largest single climate investment to date in U.S. history.”
How to pay for all these costs?
The biggest revenue boost in the act is a new minimum tax of 15 percent on companies with annual profits of more than $1 billion.
It’s a way to take down some 200 US companies that avoid paying the standard 21% corporate tax rate, including some that end up paying no tax at all.
The new corporate minimum tax will take effect after the 2022 tax year and raise about $258 billion over a decade.
Revenue was supposed to be $313 billion, but Sinema insisted on a change to the 15 percent corporate minimum tax rate that would allow manufacturing to use the depreciation deduction. This reduced total revenue by about $55 billion.
To win over Sinema, Democrats dropped plans to close a tax loophole long enjoyed by wealthier Americans — so-called carried interest, which under current law imposes a 20 percent tax rate on wealthy hedge fund managers and others .
For years, the left has sought to raise the carried interest tax rate, raising it to 37% in the original bill, more in line with higher income earners. Sinema does not allow it.
Retaining tax breaks for the wealthy cost the party the $14 billion in revenue they had hoped to help pay for the package.
Instead, with Sinema’s approval, Democrats will impose a 1% sales tax on share buybacks, raising about $74 billion over a decade.
It also raised money by pushing the IRS to track down tax evasion. The bill proposes to invest $80 billion in taxpayer services, enforcement and modernization, and is expected to generate $203 billion in new revenue — a net gain of $124 billion over a decade.
The bill sticks to Biden’s original promise to not raise taxes on households or businesses earning less than $400,000 a year.
Lower drug prices for seniors are paid for through savings that Medicare negotiates with drug companies.
extra money to cover the deficit
With about $740 billion in new revenue and about $440 billion in new investment, the bill promises to spend about $300 billion of the difference on deficit reduction.
During the COVID-19 pandemic, federal spending has soared, tax revenues have fallen and the federal deficit has soared as the U.S. economy is churned by shutdowns, office closures and other large-scale changes.
The country’s deficit has risen and fallen in recent years. But the Congressional Budget Office this week released a new report on longer-term forecasts.
What’s left?
After 18 months of start-stop negotiations, this latest package popped up at the end of July and many of Biden’s more ambitious goals fell through.
Senate Majority Leader Chuck Schumer (D-N.Y.) struck a deal with Sen. Joe Manchin to revive Biden’s package, trim it down and put the West Virginia Democrat back in Back to the negotiating table. Next, they drew Sinema, the remaining parties, and made additional changes.
The package is still strong by typical standards, but a far cry from the better plans for a full rebuild that Biden once envisioned.
While Congress did pass a $1 trillion bipartisan infrastructure bill for highways, broadband and other investments that Biden signed into law last year, other key priorities for the president and the party have slipped away. Walk.
These include a continuation of the $300-a-month Child Tax Credit, which remits money directly to households during the pandemic and is believed to have broadly reduced child poverty.
Gone, too, are the free preschool and community college programs and the nation’s first paid family leave program, which provides up to $4,000 a month for births, deaths and other critical needs.
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Associated Press writer Matthew Daly contributed to this report.
