Every congressional Democrat ultimately backed the final product, called the Inflation Reduction Act. It was largely shaped by Mr. Manchin, Mr. Schumer and Senator Kyrsten Sinema, Democrat of Arizona, another centrist holdout, who resisted many of the tax increases most of her colleagues championed. The package jettisoned most of the spending that would have gone toward expanding the nation’s social safety net, and reined in plans to undo elements of the 2017 tax law that passed during the Trump administration.
But the bill will help move the Biden administration toward fulfilling its pledge to cut emissions roughly in half by 2030, though scientists and climate activists warn that more congressional and executive action will be needed to meet that goal. The legislation aims to use the tax code to encourage consumers and companies to purchase and invest in electric vehicles, solar panels and other renewable energy sources like wind or solar power, as well as the facilities needed to build more of those items domestically.
The package includes millions of dollars in climate resiliency funding for tribal governments and $4 billion to address droughts in the Western states, and it introduces penalties for fossil fuel companies with excessive emissions of methane, a greenhouse gas.
As part of a longstanding effort to expand health care access across the country, Democrats included a three-year extension of expanded health care subsidies first approved last year as part of the $1.9 trillion pandemic aid law. The bill would also give seniors access to free vaccines, allow Medicare to negotiate the cost of up to 10 prescription drugs initially, beginning in 2026, and cap annual out-of-pocket drug costs for Medicare recipients at $2,000. It would also cap insulin costs at $35 per month for enrollees.
To pay for the package, the measure would impose a new 15 percent minimum tax on companies that report more than $1 billion in book income to their shareholders, the profits that companies report to shareholders, and it would institute a 1 percent tax on corporate stock buybacks beginning in 2023. The legislation would also invest $80 billion in the I.R.S., which Democrats say would bolster the historically underfunded agency and help crack down on wealthy tax evaders and corporations. That provision is estimated to raise $124 billion over a decade.
Republicans have trained much of their ire on the provision, warning that it amounts to a heavy-handed attack on lower- and middle-class taxpayers. In response to the criticism, Janet L. Yellen, the Treasury secretary, instructed the agency this week to ensure that there would not be an uptick in audit rates for small businesses or families that make less than $400,000.
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