The Inflation Reduction Act Is Law! Here Are 3 Major Takeaways For Parents
On Tuesday, August 16th, President Biden signed sweeping climate change legislation — among major other accomplishments — into law.
In the afternoon hours of August 16th, 2022, President Biden signed his administration’s most significant piece of legislation — and one of the most significant pieces of climate legislation in American history — since taking office. The Inflation Reduction Act (IRA) is a large and sweeping bill that will address the climate change crisis, invest in renewable energy, reconfigure the tax code, and lower prescription drug prices for millions of Americans.
The IRA is reminiscent of Biden’s Build Better Act that was stonewalled in the Senate last winter. It represents months of secret and intense negotiations amongst Senate Democrats.
The new law doesn’t address major issues that still define American life — the bill contains no provisions for paid leave, no child care, no child tax credit, no free or subsidized community or public college — amid an affordability crisis that’s hurting American families. However, it will be the largest ever climate change action taken by Congress, and it represents Democrats making good on a drug pricing white whale they’ve chased for decades and altering the tax code.
In other words, the IRA doesn’t include every goal of the Biden administration — and it might not meet some major needs for families — but it will do a lot.
When passed into law, the act will mark President Biden’s most consequential bill to date and, his administration hopes, provide a boost for Democrats as we approach midterm elections.
Though dubbed the Inflation Reduction Act, the bill won't do much to address today’s high inflation rates in the immediate. But it will work to stabilize the economy in the long term. What else will the act do? Here’s what to know about some of the most important takeaways for parents.
Address Climate Change & Lower Your Energy Bills
The IRA is the most significant piece of climate legislation since the introduction of the Clean Air Act in 1963. It allocates $369 billion to address climate change, provides incentives for corporations to make the switch to clean energy, and extends and increases and extends thousands of dollars in tax breaks on electric vehicles.
Part of that $369 billion includes $9 billion in “total energy rebates,” per MarketWatch, and tax breaks for heat pumps, solar rooftop installations, HVAC machines, insulation and sealing of houses, improved electrical wiring, electric water heaters, and more. These rebates range from many hundred to thousands of dollars.
Additional rebates include rebates for heat-pump clothes dryers and electric stoves — AKA induction ranges. The induction range rebate alone is $840. Gas-powered stoves have been shown to be harmful to our health and to the environment, so the government incentivizing replacing gas stoves with induction ones is great for families.
Homeowners trying to greenify their home could collect, at maximum, $14,000 in rebates, if their family does not exceed 150% of the median income of their area. (But don’t worry — there are tax credits available if you do make too much money to qualify for the rebates.)
And not only will replacing the included appliances be much cheaper — it will be cheaper for families in the long run. A one-sheet from Senate Democrats describing the bill said that energy bills for families could be cut by $500 to $1,000 a year.
“A household with an efficient electric heat pump for space heating and cooling, a heat pump water heater, one electric vehicle, and solar panels would save $1,800 a year,” one expert said, per MarketWatch. Those same experts, from Rewiring America, suggested that if a “household invests their energy bill savings from electrifying their home appliances, these savings will grow to $30,000 after 10 years.”
And although it’s great for our wallets, it’s even better for planet Earth. Analysts estimate that changes made because of the IRA will lower carbon emissions by 40% over the next eight years.
Lower Prescription Drug Prices
The IRA gives Medicare the power to negotiate drug prices directly with drug manufacturers, something that hasn’t been allowed in almost two decades and that has been a policy goal of the Democratic party for decades.
The Secretary of Health and Human Services will “negotiate the prices of 10 drugs in 2026, and another 15 drugs in 2027 and again in 2028. The number would rise to 20 drugs a year for 2029 and beyond,” according to CNN.
The bill also expands Medicare benefits for seniors to include free vaccines by 2023, insulin price caps for seniors, and out-of-pocket medication cost caps at $4,000 or less annually by 2024, before lowering that cap to $2,000 in 2025, per Democrat estimates.
The bill extends pandemic-era Affordable Care Act (ACA) subsidies that were set to expire this year. These subsidies have allowed millions of Americans to qualify for low- or no-cost health insurance premiums on the ACA marketplace. It’s expected to save the average ACA enrollee $800 a year in the ACA marketplace.
Raise Taxes On Corporations And The Wealthy
The Senate approved a 15% minimum tax on large corporations, a 1% tax on corporate stock buybacks, and a tax increase on Americans who earn more than $400,000. Individuals who earn less than $400,000 and married families that earn less than $450,000 will not experience a tax increase.
"Rather than risking more inflation with trillions in new spending, this bill will cut the inflation taxes Americans are paying, lower the cost of health insurance and prescription drugs, and ensure our country invests in the energy security and climate change solutions we need to remain a global superpower through innovation rather than elimination," Senator Manchin said.
“This bill is the biggest step forward on climate, ever,” Biden said at the signing event.