The U.S. Senate has approved an ambitious bill that includes new rules for health, climate, and taxes. The Democrats’ plan, worth $750 billion, was passed along party lines (51 to 50 votes), with Vice President Kamala Harris casting the tie-breaking vote. To take effect, it still needs to be approved by the House of Representatives, which is expected since the House has a Democratic majority. Despite the narrow vote, the approval of this bill represents a significant victory for President Joe Biden and his party.
The bill – called the “Inflation Reduction Act” – includes several important provisions. In terms of climate, it is the largest climate investment in U.S. history. The main goal is to reduce carbon emissions by up to 40% by 2030. This will require strong climate regulations from the Biden administration and actions from states to change the consumption habits of the population.
Regarding health, lawmakers are extending enhanced federal subsidies for Obamacare coverage until 2025, instead of 2024, after the elections. The most important clause, however, is the one that reduces the prices of prescription drugs.
To increase federal revenue, the legislation aims to impose a minimum tax of 15% on the income that large corporations report to shareholders, known as book income, as opposed to the IRS. This measure, which aims to raise $258 billion over a decade, applies to companies with profits above $1 billion.
But what about inflation, since it names the bill? There are several measures included in the bill aimed at combating inflation by targeting specific sectors, such as electricity, for example. However, Republicans argue that the bill will not solve the inflation problem. For them, the measure is a wish list of Democrats that could hinder job creation and harm economic growth at a time when there is a risk of recession.