A Detailed Picture of What’s in the Democrats’ Climate and Health Bill

By Francesca Paris, Alicia Parlapiano, Margot Sanger-Katz and Eve WashingtonAug. 13, 2022

Democrats in Congress have had to scale back their legislative ambitions since last year, but the Inflation Reduction Act, passed by the House on Friday and sent to President Joseph R. Biden Jr. for his signature, is still a substantial piece of legislation, which will make big investments in the environment and health care, and increase taxes on some key groups.

The bill includes policies lowering the prices of prescription drugs; increasing the generosity of Medicare benefits; and encouraging the development of renewable energy and reducing the impact of climate change. 

It would also raise taxes on some corporations and bolster the ability of the Internal Revenue Service to crack down on wealthy tax evaders. It would lower the federal deficit, though modestly.

The bill includes last-minute changes requested by Senator Kyrsten Sinema, Democrat of Arizona, the final holdout among her party’s 50 senators. Democratic leaders agreed to remove a tax on some wealthy hedge fund managers and private equity executives, and to include $4 billion in drought funding for her state.

The table below describes everything in the bill, including the prices:

What’s in the Inflation Reduction Act

Figures are in billions and over 10 years.

Spending and tax cuts: $490 billionHealth careCost in billions Affordable Care Act subsidies 
Expanded subsidies for three years$64.1Medicare prescription drug benefit 
Increased generosity through Part D redesign and a $35 cap on co-payments for insulin$34.2Clean electricityCost in billions New tax credits for emissions-free electricity sources and storage 
Including wind, solar, geothermal, advanced nuclear, etc.$62.7Extending existing tax credits for wind and solar power 
$51.1Tax credit for existing nuclear reactors 
To prevent them from closing$30.0Extend energy credit 
Through 2024$14.0Clean energy rebates and grants for residential buildings 
Rebates for installing heat pumps and retrofitting homes$9.0Financing for energy infrastructure 
Updates and expands lending programs to make energy generation and transmission more efficient$6.8Tax credit for carbon capture and storage 
$3.2ManufacturingCost in billions Clean manufacturing incentives 
Incentives for companies to manufacture clean energy technologies in the U.S. rather than abroad, through tax credits and the Defense Production Act$37.4Reduce emissions from energy-intensive industries 
Such as concrete production$5.3Individual clean energy incentivesCost in billions Green energy credits for individuals 
Extends and increases tax credits for energy-efficient properties$36.9Clean fuel and vehiclesCost in billions Tax credits for new and used electric cars 
Incentives for purchasing emissions-free vehicles, with income limits, and for installing alternative fueling equipment.$14.2Clean hydrogen production 
$13.2Fuel tax credits 
Creates new credits for low-carbon car and airplane fuels, and extends credits for biodiesel and other renewable fuels$8.6Financing for clean energy vehicles 
Loans and grants for the production of hybrid, electric and hydrogen fuel cell cars$2.9Air pollutionCost in billions “Green bank” for energy investments 
For investments in clean energy projects, particularly in poor communities$20.0Other air pollution reduction 
Includes funding for monitoring and reducing pollution, and grants for disadvantaged neighborhoods$14.8Conservation, rural development and forestryCost in billions Agricultural conservation 
Funding for agricultural practices that improve soil carbon, reduce nitrogen losses and decrease emissions$16.7Rural development 
Investments in clean energy technology in rural areas$13.2Forest conservation and restoration 
Includes funding to reduce risk of wildfires$4.8Transportation and infrastructureCost in billions Improvements to federal buildings and highways 
$5.2Electric transmission 
Loans and grants to finance electricity transmission, including for offshore wind energy generation$2.3Other climate spendingCost in billions Drought resilience 
$4.6Weather and climate resilience 
Includes investments in coastal areas and weather forecasting resources$4.6Other federal research, projects and oversight 
Includes funding for FEMA, D.H.S. and D.O.E.$4.2Zero-emissions U.S.P.S. trucks 
$3.0National Park Service funding 
Includes funds for climate resilience and habitat preservation$1.0Data collection and environmental reviews 
$0.8Other 
$0.7Tribal funding 
Clean energy, electrification, drought relief and climate resilience for federally recognized tribes. $0.5Wildlife recovery and habitat climate resilience 
$0.3

Savings and new revenue: $764 billionTaxesRevenue in billions 15% corporate minimum tax 
$222.2I.R.S. enforcement 
Projected net revenue raised from $80 billion in compliance and enforcement funding.$124.1Stock buyback tax 
$73.7Extend active loss tax limitation two years 
$52.8Health careRevenue in billions Repeal a regulation on prescription drug rebates 
This regulation has never gone into effect, so the savings are mostly just on paper$122.2Drug price negotiation* 
Medicare negotiation on prices for certain drugs$99.0Limits on drug price increases* 
$62.3Energy and climateRevenue in billions Methane reduction incentives 
Sets methane waste emissions thresholds and charges facilities that exceed them. (Increased revenue net of new spending.)$4.8Reinstatement of Superfund 
Increased revenue net of new spending.$1.2Tax to fund the Black Lung Disability Trust Fund 
Permanent extension$1.2New oil and gas leases 
On federal land and in the Gulf of Mexico$0.5Other tax adjustments 
$0.3Wind lease sales 
$0.2

*These are rough estimates because of changes to the drug price provisions in the bill after cost and savings estimates were released. Savings from the drug price negotiation policy may end up being lower, and the savings from limits on drug price increases are unofficial estimates based on an analysis by Don Schneider, a former chief economist of the House Ways and Means Committee.

But if the current bill includes a lot — in spending, new taxes and policies — it also omits a lot of the Democrats’ original ambitions. Missing is an entire set of family policies that were in a bill passed by the House last year, like a generous child tax credit and paid family leave.

Certain health policies, such as an expansion of Medicaid to give more low-income adults health insurance, have been removed to pare down the bill’s cost. And though the climate policies are the most expansive passed by any Congress, they are more modest than those included in earlier versions of the legislation.

The current bill includes clean electricity incentives that are comparable in size to those in a version passed by the House last year. But it scales back spending in almost every other category, from transportation to climate resilience. Some proposed investments from earlier versions — like those for lead remediationwork force developmentsuch as a Civilian Climate Corps, and electric bicycle tax credits — did not make it into the new text. The one major exception is manufacturing: Compared with previous versions of the bill, this legislation marks a significant increase in grants, loans and tax credits to manufacture clean energy technology domestically.

But it also pairs new climate spending with several major concessions to the fossil fuel industry at the request of Senator Joe Manchin III of West Virginia, whose support was necessary to advance the bill.

Here’s how the legislation compares with the much larger social safety net and climate bill passed by the House in November, often referred to as Build Back Better.

How the Bill Compares With Build Back Better

Figures are in billions and over 10 years.

Spending and tax cuts Inflation Reduction Act 
In billions Build Back Better
In billions Energy and climate Tax credits and new spending 
$392$570Health care Home health care through Medicaid 
—$150Expanded subsidies for Affordable Care Act health insurance 
$64$130New Medicare hearing benefit 
—$35Increased generosity in Medicare’s prescription drug benefit 
$34—Health care work force spending 
—$25Family benefits New child care program (6 years) 
—$270Four weeks of annual federal paid family and medical leave 
—$205Universal preschool for 3- and 4-year-olds (6 years) 
—$110Individual tax cuts Child tax credit increase for one year; fully refundable after 2022 
—$190Expanded earned-income tax credit extended for one year 
—$15Other tax changes 
—$10Other Build and support affordable housing 
—$175Immigration reform 
—$110Other spending 
—$115Higher education and work force 
—$40Total$490 billion $2.15 trillionSavings and new revenueInflation Reduction Act 
In billions Build Back Better
In billions Health care Negotiation of certain drug prices and limit price increases* 
$162$160Repeal a regulation on prescription drug rebates 
$122$145Adjustments to uncompensated care pools 
—$20Corporate taxes 15% corporate minimum tax 
$222$320Stock buyback tax 
$74$12515 percent global minimum tax and international taxation reforms 
—$280Other 
—$105Individual taxes Expand the net investment income tax 
—$250Surtax on income above $10 million 
—$230Extension of limits on excess losses of noncorporate taxpayers 
$53$160Increase state and local tax deduction cap through 2025 
—$15Other revenue I.R.S. enforcement 
$124$130Methane fee, Superfund fee and other revenue 
$18$50Total$775 billion $2 trillion

*The figure for the Inflation Reduction Act is a rough estimate because of changes to the drug price provisions in the bill after cost and savings estimates were released. Savings from the drug price negotiation policy may end up being lower, and the savings from limits on drug price increases are unofficial estimates based on an analysis by Don Schneider, a former chief economist of the House Ways and Means Committee.

The Inflation Reduction Act is projected to reduce deficits by roughly $275 billion over 10 years, while the Build Back Better plan passed by the House would have added about $160 billion to deficits.

Democrats have said the new bill’s deficit reduction, as well as the provisions aimed at lowering energy and prescription drug costs, will help address the rapid inflation over the past year. Many economists, including supporters of the bill, have said that while it may reduce price pressures, the overall effect is likely to be modest, and over the long term.

The promise of taming inflation helped bring Mr. Manchin on board, who cited concerns about rising prices when he pulled his support from the bill passed by the House last year.

In a statement last month after an agreement on a new bill had been made with Democratic leadership, Mr. Manchin announced, “Build Back Better is dead, and instead we have the opportunity to make our country stronger by bringing Americans together.”

Sources: Congressional Budget Office; Joint Committee on Taxation; Committee for a Responsible Federal Budget; Don Schneider, Piper Sandler

Additional reporting by Brad Plumer

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