A party-line vote in the House of Representatives sent the Inflation Reduction Act to the Oval Office on Friday.
After a contentious journey in the Senate, the lower chamber of Congress quickly passed the bill on August 12 as Democrats relied on the budget reconciliation process to sidestep extended debate. Ultimately, all 220 Democrat representatives voted in favor of the proposition, while all 207 Republicans voted against the measure.
Speaker of the House Nancy Pelosi (D-CA) heralded the passage, declaring, “Our Inflation Reduction Act is a robust cost-cutting package that meets the moment, ensuring that our families thrive and that our planet survives.” She called it “a resounding victory for America’s families, starting at their kitchen table.”
The act spends over $350 billion in taxpayer funds on “climate change initiatives” and “renewable energy efforts.” Additionally, it increases the budget for the Internal Revenue Services (IRS) by $80 billion, effectively doubling the size of the agency to increase enforcement, according to Sen. Joe Manchin (D-WV).
Despite the bill’s expressed intention, worries persist that the increased IRS enforcement capacity will predominately target small businesses and middle- to lower-class families.
Vice President of the National Taxpayers Union Foundation Joe Hinchman explained, “They won’t fight back. … The IRS says, ‘We’re going after the rich,’ but when you’re trying to raise that much money, the rich can only get you so far.”
Increased taxes also accompany the legislation, targeting corporations, stock buybacks, and pharmaceuticals. The legislation hopes to persuade drug manufacturers to lower their prices by threatening up to a 1,900% excise tax if they fail to “negotiate” with the government to set reduced costs.
The Congressional Joint Committee on Taxation (JCT) claimed that people making less than $200,000 a year would be hit with an additional $16.7 billion in taxes. They further suggested that if the bill passes, people making less than $10,000 a year will experience a 3.1% increase, and those who make $20,000 to $30,000 will see a rise of 1.1% in 2023.
Additionally, several studies of the bill’s potential effect suggest that, despite the name, it will have next to no positive impact on inflation.
The Penn Wharton Budget Model at the University of Pennsylvania noted that they have a “low level of confidence that the legislation would have any measurable impact on inflation.” They clarified, saying “the Act would slightly reduce GDP in the first decade.”
Bernie Sanders (I-VT), a supporter of the legislation, even referred to it as “The so-called Inflation Reduction Act … and I say so-called by the way, because according to the CBO and other economic organizations that have studied this bill, it will, in fact, have a minimal impact on inflation.”