Senate Democrats Announce Agreement on Inflation Reduction Act

On July 27^th, Democrats in the Senate announced that they have reached agreement on a budget reconciliation package that would raise an estimated $739 billion, with the revenue going to fund climate and health initiatives, as well as to reduce the budget deficit. While it would amount to the biggest tax hike in years, it is a much smaller package that previously proposed under Biden’s Build Back Better initiative.  The legislation, called the Inflation Reduction Act, would invest $369 billion in domestic energy production and manufacturing activities with the goal of reducing U.S. carbon emissions by approximately 40% by 2030. An additional $64 billion is allocated to extend Affordable Care Act coverage for another three years. The proposal results in an estimated $300 billion deficit reduction through the following revenue provisions:

• 15% corporate minimum tax – raising $313 billion over ten years
• Prescription drug pricing reform – raising $288 billion
• Increased funding for IRS tax enforcement – raising $124 billion
• Closing the carried interest “loophole” – raising $14 billion

Democratic leadership has submitted the legislation to the Senate Parliamentarian to review budget reconciliation legislation and confirm that all provisions within are budgetary impacting. In previous attempts at this legislation, the Parliamentarian had rejected certain immigration-related provisions on these grounds. The legislation has the support of Sen. Manchin, who had been the largest roadblock to passing a reconciliation package.  Sen. Sinema is the only other Democratic Senator who has expressed reservations with the broader Build Back Better proposals.  It has been reported that she is currently reviewing the proposal and will likely indicate her position sometime the week of August 1st.  It is expected that the Senate will consider the package next week.

A summary of the bill can be found here.