WASHINGTON (AP) — It’s nowhere near the $4 trillion proposal that President Joe Biden first proposed to rebuild America’s public infrastructure and family support systems but the compromise package of anti-inflation, public health, climate change and deficit-reduction policies appears headed for Senate votes this weekend.
The estimated $740 billion proposal met by two top negotiators, Senate Majority Leader Chuck Schumer and Holdout Senator Joe Manchin, the conservative Democrat from West Virginia, contains some hard-fought party priorities. But the finishing touches came this week from Sen. Kyrsten Sinema, D-Ariz., who put her hand to work on the latest revisions.
What is in and out of the Democrats’ Inflation Reduction Act of 2022 as it stands:
REDUCED COSTS FOR COMMERCIAL MEDICATIONS
Introducing a long-awaited goal, the bill would enable the Medicare program Negotiate prescription drug prices with pharmaceutical companies, saving the federal government about $288 billion over the 10-year budget window.
That new revenue would translate into lower costs for seniors on medications, including a $2,000 cap for older adults who buy prescriptions from pharmacies.
The money would also be used to provide free vaccinations for seniors, who are among the few now not guaranteed free access, according to a summary document.
HELP PAY FOR HEALTH INSURANCE
The bill would extend subsidies provided during the COVID-19 pandemic to help some Americans who are getting health insurance themselves.
Under previous pandemic aid, the additional aid was due to phase out this year. But the bill would allow the support to continue for three more years and reduce insurance premiums for people who buy their own health insurance policies.
“LARGEST SINGLE CLIMATE CHANGE INVESTMENT IN US HISTORY”
The law would invest nearly $374 billion in climate change mitigation strategies over the decade, including investments in renewable energy generation and tax rebates for consumers buying new or used electric vehicles.
It includes $60 billion for a clean energy manufacturing tax credit and $30 billion for a manufacturing tax credit for wind and solar energy, which are seen as a means to encourage and support industries that can help reduce dependency on the planet Curb the country’s use of fossil fuels. The bill also provides tax credits for nuclear power and carbon capture technology, which oil majors like Exxon Mobil have invested millions of dollars in developing.
The bill would impose a new fee on excess methane emissions from oil and gas wells while giving fossil fuel companies access to more leases on state land and water.
A late addition, pushed by Sinema and other Democrats in Arizona, Nevada and Colorado, would allocate $4 billion to address a mega-drought in the West, including efforts to protect the Colorado River Basin, which is hit by nearly 40 Millions of Americans depend on it for drinking.
There are tax breaks for consumers as an incentive to go green. One is a 10-year excise tax credit for renewable energy investments in wind and solar power. There are tax credits for purchasing EVs, including a $4,000 tax credit for used EV purchases and a $7,500 tax credit for new ones.
Overall, Democrats believe the strategy could put the country on a path to cutting greenhouse gas emissions by 40% by 2030 and “would represent by far the largest climate investment in U.S. history.”
HOW CAN YOU PAY FOR ALL THIS?
The bill’s biggest source of revenue is a new minimum tax of 15% for companies that generate more than $1 billion in annual profits.
It’s a way to crack down on about 200 U.S. companies that avoid paying the standard 21% corporate tax rate, including some that end up paying no taxes at all.
The new corporate minimum tax would take effect after the 2022 tax year and would generate around $258 billion over the decade.
Revenue would have been $313 billion, but Sinema insisted on a 15% change in the company minimum to allow for a depreciation allowance used by the manufacturing industry. That saves about $55 billion in total revenue.
Money is also raised by boosting the IRS to investigate tax evasion. The bill proposes an $80 billion investment in taxpayer services, enforcement and modernization that is expected to generate $203 billion in new revenue — a net gain of $124 billion over the decade.
The bill sticks to Biden’s original promise not to levy taxes on families or businesses earning less than $400,000 a year.
Lower drug prices for seniors will be paid for with savings from Medicare’s negotiations with drugmakers.
WHAT HAS CHANGED IN THE LAST DAYS?
To win over Sinema, Democrats dropped plans to close a tax loophole that wealthier Americans have long enjoyed — the so-called “carried interest,” which currently taxes wealthy hedge fund managers and others at a 20% rate.
The left has been trying for years to raise the carried-interest tax rate, which was raised to 37% in the original bill to be more in line with upper-income brackets. Sinema would not allow it.
Keeping the tax break for the wealthy deprives the party of $14 billion in revenue it was counting on to fund the package.
In their place, Democrats will nod Sinema by imposing a 1% consumption tax on stock buybacks, which will raise about $74 billion over the decade.
ADDITIONAL MONEY TO PAY DEFICIENCES
With about $740 billion in new revenue and about $433 billion in new investment, the bill promises to use the difference to reduce the deficit.
Government deficits soared during the COVID-19 pandemic as federal spending soared and tax revenues fell as the country’s economy was roiled by shutdowns, closed offices and other massive changes.
The nation has seen deficits rise and fall in recent years. However, the federal budget as a whole is on an unsustainable path, according to the Congressional Budget Officewhich released a new report on long-term forecasts this week.
This latest package after 18 months of stop-start negotiations leaves many of Biden’s more ambitious targets behind.
While Congress passed a $1 trillion bipartisan infrastructure bill For freeways, broadband and other investments Biden signed into law last year, the president’s and party’s other key priorities have slipped away.
Among them is a continuation of a $300 monthly child tax credit that sent money directly to families during the pandemic and is believed to have largely reduced child poverty.
Plans for a free pre-kindergarten and community college and the country’s first paid family vacation program, which would have provided up to $4,000 a month for births, deaths and other essential needs, are also gone for now.
Associated Press writer Matthew Daly contributed to this report.