President Joe Biden has signed his broad tax, health, and climate measure into law after more than a year of discussion over expenses, taxes, tax credits, and regulations — although a much diminished version of the $1.75 trillion Build Back Better plan he was pushing for last year.
The newly titled Inflation Reduction Act was signed into law by the president.
The new law includes a $369 billion investment in climate and energy policies, $64 billion to extend a policy under the Affordable Care Act to reduce health insurance costs, and a 15% corporate minimum tax aimed at companies that earn more than $1 billion a year.
How does this bring down inflation?
The law addresses growing costs in three ways. First, it intends to minimize the federal deficit, which is the gap between what the federal government spends and what it collects in taxes and income. When there is less money circulating about in the economy, there is less demand and fewer price increases.
It will encourage the development of specific items, namely renewable energy. Having more supply than demand might help cut some costs over time.
Most directly, one component of the law would assist in limiting the price increase of some prescription pharmaceuticals by allowing Medicare to negotiate their cost with pharmaceutical corporations. Nonetheless, some of the most significant causes of inflation, such as food and energy costs, are not addressed promptly.
The package includes $369 billion in new spending to reduce greenhouse gas emissions, invest in clean energy technologies and extend subsidies for the Affordable Care Act.
The bill also plans to bring in more than $300 billion in new revenue, Democrats say, by imposing a 15% minimum tax on corporations making over $1 billion and through a new excise tax on corporate stock buybacks.