The Inflation Reduction Act provides hundreds of billions of dollars to combat global warming. Some climate activists describe it as “transformative.” Here are the winners and losers in the ‘Inflation Reduction Act.’
Bloomberg has put together a list of winners and losers as Democrats celebrate the Senate’s passage of their expansive tax, climate, and healthcare bill, the “Inflation Reduction Act,” something that Senate Majority Leader Chuck Schumer declared “one of the most significant pieces of legislation passed in a decade.”
WINNERS:
The Wealthy
Democrats’ intentions to “tax the 1%” panned out to be little more than a big virtue signal, since none of the billions in tax hikes they scared high earners with last year made it into the final draft of the legislation.
Private equity fund managers
The historic legislation was only approved after Arizona Sen. Kyrsten Sinema insisted on maintaining the carried-interest loophole, which enables investment managers (including her former employers) to defer the bulk of their earnings from higher taxes.
The private equity industry was able to gain an additional win shortly before the final passage of the bill when a handful of Democrats broke with their party to vote on a Republican amendment that created a carveout for private equity-owned companies in the corporate minimum tax.
-Bloomberg
After holding their party hostage for more than a year over this bill, Manchin and Sinema emerged as huge victors. According to the report, “The entire contents of the bill were essentially cherry-picked by Manchin and then tweaked to fit Sinema’s preferences.”
The pair have also been able to gain immediate benefits for their states, with Sinema obtaining $4 billion in drought aid for western states and Manchin having secured a deal to allow the completion of the Mountain Valley Pipeline by Equitrans Midstream Corp.
The IRS And The Green agenda
The law will grant the IRS $80 billion over the following ten years to increase its audit powers and fund a plethora of technological advancements.
The popular $7,500 per vehicle buyer tax credit for EVs was extended for the time being, but electric car manufacturers must now abide by stringent battery and crucial mineral sourcing criteria imposed by Sinema and Manchin, which might make the credits useless for years.
While operators of nuclear reactors like Southern Co., Constellation Energy Corp., Public Service Enterprise Group Inc., and Energy Harbor Corp. could profit from a $30 billion production tax credit, solar and hydrogen companies like Sunrun and Plug Power, Inc. would also gain from favorable tax credits.
Medicare, Obamacare Enrolees
The final law limits seniors’ out-of-pocket costs for prescription drugs to $2,000 annually and gives Medicare the authority to negotiate over the costs of 10 drugs in four years. The bill also delays for three years a significant hike in Obamacare premiums that was scheduled to take place in January for many middle-class Americans.
LOSERS:
Republicans who believed Manchin and Sinema would stick to their campaign vows to raise taxes in the face of a recession.
The GOP was confident they had beaten back Biden’s tax and climate agenda and were stunned in late July when Schumer and Manchin announced a deal. While still the favorites to gain seats in the midterm elections, passage of the bill is a major setback for the GOP’s policy aims. It does, however, give them a new issue to campaign on in the fall campaigns.
-Bloomberg
Other losers entail technology firms, which will endure the brunt of the bill’s 2 significant tax hikes: a 15% minimum tax on financial statement earnings and a new levy on stock buybacks, that have enabled businesses like Alphabet’s Google and Meta’s Facebook to reduce their tax load over the years.
SALT – the ability to subtract state and local taxes, with a $10,000 cap that coastal Democrats hoped to eliminate.
According to Bloomberg, Bernie Sanders sought $6 trillion in spending, so the $437 billion in increased spending is a far way from success. All ideas for additional social programs, such as tuition-free college, child care, housing spending, and an enlarged monthly child tax credit, are omitted from the bill.