September 1, 2022

Eight Ways the Inflation Reduction Act Helps Working People

Last month, Senate Majority Leader Chuck Schumer (N.Y.) announced an agreement with Sen. Joe Manchin (W.Va.) to bring a slimmed-down version of the bill previously known as the Build Back Better Act to the Senate floor before the start of the August recess. The Senate passed the bill August 7, and the House of Representatives passed the legislation August 12—with zero support or votes from Republicans. President Biden signed the Inflation Reduction Act into law August 16.
AFL-CIO President Liz Shuler applauded the agreement, known as the Inflation Reduction Act, and noted after the Senate passed the legislation that it “will transform the lives of working families at every level.”

“This bill will reshape the future and deliver real help to working families by reducing rising energy and health care costs,” Shuler said. “Enacting clean energy tax incentives with labor standards and domestic content requirements will create good-paying jobs in construction and manufacturing right here in America. And this legislation will address long overdue changes to our tax system that will finally make the most profitable corporations pay their fair share.

“The Inflation Reduction Act will reduce climate pollution by 40 percent—keeping President Biden’s promise to make the United States a global leader in the fight against climate change. These incentives will spur the economic transformation we need to address the climate crisis, make clean energy more accessible and affordable and direct investments to underserved communities. The effects of this legislation will improve the lives of millions of Americans struggling to afford health care, seniors trying to pay for their prescriptions and future generations who will be able to see the impacts of drastically reduced carbon emissions.”

Here are eight provisions of the legislation that will benefit working people:

1. Negotiation of Lower Drug Prices for Seniors: Medicare will begin negotiating lower drug prices for seniors and people with disabilities. Drug price negotiation will focus on the highest expenditure drugs that have been on the market for between nine and 13 years. Negotiation will also save the Medicare program $99 billion, which will bolster the program financially.

2. Inflation Caps for Prescription Drugs: The bill caps increases in prescription drug prices to the rate of inflation, putting a much-needed limit on how much manufacturers can raise costs for people who rely on prescriptions to manage their health. The current bill language applies this cap to drugs sold to people in private health plans as well as people in Medicare. These provisions are expected to save private plans and the Medicare program billions of dollars.

3. Improved Medicare Prescription Benefits: Seniors’ out-of-pocket costs for prescription drugs covered by Medicare Part D will be capped at $2,000 a year, helping 1.4 million enrollees annually. In addition, cost sharing for vaccines will be reduced to zero. This cap will take an incredible weight off the shoulders of older adults living on a fixed income.

4. Preventing a Premium Spike for ACA Enrollees: The bill prevents premium increases for 13 million people for the next three years by extending the enhanced premium tax credits for people with Affordable Care Act marketplace coverage. The enhanced credits provided by the American Rescue Plan Act significantly reduce premiums for marketplace enrollees with low/middle incomes and cap premiums at 8.5 percent of income for all enrollees; without this new bill, the policy will expire at the end of 2022.

5. Investment in Climate, Energy and American Manufacturing: The legislation makes historic public investments in clean energy deployment and domestic manufacturing of clean energy goods. It includes not just wind and solar, but the full suite of technologies that labor traditionally supports—including nuclear, carbon capture and hydrogen. These provisions dramatically lower the cost of clean energy, positioning the U.S. to make deep carbon emissions reductions while preserving and creating millions of jobs, with an especially big boost to manufacturing. Importantly for fairness and diversity, it pushes investment to fossil fuel and underserved communities. While the “union bonus” incentives we advocated for were not included, the bill retains provisions that strengthen prevailing wage, apprenticeship and domestic content standards throughout.

6. Investing $80 Billion in the IRS to Strengthen Enforcement: This provision is expected to increase IRS collections by $203 billion and will not be used to increase taxes on any taxpayer with taxable income below $400,000.

7. Imposing a 15 percent Minimum Corporate Tax on Corporations with Profits Exceeding $1 Billion: This provision would make sure that the largest corporations, many of which avoid paying taxes altogether, pay a minimum tax of 15 percent on their net profits. It would raise $313 billion.

8. Closing the “Carried Interest” Tax Loophole: This provision would close the tax loophole that allows wealthy investment fund managers to pay lower taxes than their support staff. It would raise $14 billion.

While this legislation is an important victory, Shuler said there is more to be done. “We need to keep working to deliver further relief that working people need: a bolstered right to organize and help accessing critical supports like child care and affordable housing,” she said. “While this bill represents an incredible step forward, we know the fight for climate and economic justice is not over. The AFL-CIO’s 12.5 million members are united in support for this legislation … and we will keep fighting to make more progress for the people who power our economy.”

- www.afl-cio.org