The full HR 5376 package is 725 pages long, and understanding it all, including how implementation will affect outcomes, will require further analysis. But here is a general overview of it all Democratic senators now support.
Corporate tax reform: The first part of the law actually falls under the “deficit reduction” section. Given the way the media has played up inflation, only occasionally acknowledging that it’s a global problem and not something unique to the US, this piece of legislation allows those who sign it to claim they’re fighting inflation and correcting corporate wrongs , even as they also address the climate crisis. The major subject here is a a corporate minimum tax of 15%, which will help eliminate all those “corporation X made billions but paid no taxes” cases. As with most tax measures, there are ways corporations can restructure their balance sheets to avoid parts of this tax, but the bill requires some effort in trying to close known loopholes. This measure alone is expected to raise about $370 billion
Closing the carried interest gap: One tax evasion receives special attention. The bill would end the carried interest loophole that currently allows corporations and investment managers to pay a 20% long-term capital gains tax rate on “income received as compensation” instead of what is typically a much higher rate for ordinary income. The bill exempts families making less than $400,000 and is expected to raise about $14 billion.
Additional funding for IRS investigations: There is a significant increase in funding for the IRS specifically to increase investigations into tax evasion. The bill would require the IRS to invest more than $48 billion over the next decade, but the net gain is projected to be nearly $125 billion.
Allows Medicare to negotiate prescription drug prices: this section is long overdue to end the ongoing cash-out to pharma investors. This move alone is expected to save the federal government $288 billion, which makes the fact that it didn’t happen sooner a good source of immediate outrage. There are some exceptions to that legislation that allow some new agents, particularly “biologics and biosimilars,” which are increasingly important in cancer treatment, to stay in the sauce. Now. But out-of-pocket costs for Medicare members are capped at $2,000. There are also consumer rebates for drug costs that increase due to inflation, and a penalty for manufacturers who increase the cost of an existing drug above the rate of inflation.
Collectively, these measures add up to savings that the Congressional Budget Office estimates at $739 billion, and each of these actions is a net benefit.
Here’s how the bill spends $433 billion while reducing the deficit by more than $300 billion.
Three years of subsidies for the Affordable Care Act: Tired of watching Republicans fight over the Affordable Care Act every year, constantly split on subsidy levels, and force them to give up on some other point to get people health care? Relax for the next three years, as this legislation puts $64 billion in subsidies on the books.
Credits for producers of renewable energy products: Currently, most solar panels are manufactured in China, and in recent years, other countries such as India and Vietnam have come to the fore as existing panels become commoditized products, seeking the lowest possible cost at every turn. However, there are ways to create more efficient, longer-lasting solar panels, as well as high-efficiency turbines for wind power, and the ever-increasing need for high-capacity battery storage. The legislation hopes to lure both of those companies back to the United States with $60 billion in incentives to open new factories and expand existing ones.
Extending tax credits for renovating housing: For those who have sweated the idea that tax credits for adding solar or other renewable energy to the home will soon end, those fears are being put to rest with credits that are being both extended and expanded. Credits would apply to rooftop solar panels and related systems, high-efficiency heat pumps, and more. The section also provides $9 billion for consumers who want to make their homes more energy efficient through insulation and other improvements, and another $1 billion for affordable housing retrofits to use less energy. Wind and solar providers would also receive additional funding to provide power to low-income areas.
Credit for carbon sequestration: Yes, carbon capture technology has completely failed to address the problems it is most often associated with, namely “clean coal”. That has tarnished its reputation among activists, but if we’re going to meet the goals we need to tackle the climate crisis, one step will be figuring out ways to drastically reduce the carbon produced by things like concrete production. Manchin may have made this one of his biggest deals in negotiating this bill, even though it likely won’t affect his favorite industry. Most of the legislation expands the scope of existing tax credits and increases the level of subsidies.
Nuclear energy tax discount: Either you think nuclear power is worse than fossil fuels and you’ll hate it, or you think nuclear power is a necessary part of a zero-emissions strategy and you’ll love it. In any case, there is a subsidy here that boosts nuclear a bit, but not at a level that makes nuclear a competitive solution to ever-cheaper renewables. For the most part, this looks like a $0.03/kilowatt hour return for existing nuclear plants.
Extension of existing credits for ethanol and biodiesel: This is another of the existing programs where the reasons for the technology have less to do with preventing climate change than with providing additional markets for agricultural goods. In short: it helps keep corn prices up. And it will be, because the existing credits have been extended until 2025, but not obviously increased.
Credit for hydrogen vehicles and fuel: There are still those who expect hydrogen to take off and surpass batteries as the preferred means of powering electric vehicles and enabling large-scale energy storage. There are some good arguments for hydrogen (and at least as many against), but hydrogen fans will get a chance to keep fighting because credits for hydrogen production and hydrogen vehicle production have also been extended. They are also slightly changed from the previous credits, but as there are a lot of details that replace points in the previous legislation, it will take some time to figure out how to do this.
Electric car loans: Tax credits for purchasing electric vehicles have been a big factor in keeping the current generation of EVs affordable for consumers, and those credits were about to expire. Now they are back and they are significantly better than before due to two factors:
- The $7,500 New Vehicle Incentive is no longer waived after multiple vehicle sales. This means, among other things, that you can buy a 240-mile EV from GM for an actual price of less than $20,000.
- A $4,000 credit will now be awarded on the purchase of a used EV. Getting EVs into the used vehicle chain and making them attractive has been a challenge, especially due to high demand, which sometimes causes used vehicles to sell for more than new ones. But this bill should help both get more new vehicles and make buying used EVs more attractive.
The EV portion of the bill has limits, including a maximum price of $55,000 for a car and no more than $80,000 for an SUV or truck. But at the moment there is a lot of for vehicles below this threshold. There are also income limits for buyers, which are set at $112,500 for an individual and $150,000 for a family. These restrictions may be annoying to some, but they help push the idea that it’s meant to make EVs affordable for working-class and middle-class families, rather than providing a discount to wealthy consumers buying a status symbol.
In total, CBO puts these investments at $433 billion.
The biggest factor may not be any of the dollar amounts, but the simple word “extension” that comes up over and over again. This is especially important when it comes to loans for renewable energy projects and production. The biggest thing this bill brings is the kind of long-term stability that attracts investors and allows manufacturers to engage in large-scale projects. This is a very, very important factor when it comes to finally idling the remaining fossil fuel plants and creating renewables and storage sources.
Is that all we want? No. Major programs are missing, leaving more than $300 billion in the name of pointless deficit reduction. Every dollar of that could go to something important, like improving the nation’s grid so that renewable energy can be sourced in the most efficient places and used to power where it’s needed. The bill includes more than a few silly points like the West Virginia Gas Pipeline and does nothing to impose new limits on fossil fuel production or limit greenhouse gases or other forms of pollution.
But is this a bill that gives America the overwhelming information it needs? For sure.