The full package of H.R. 5376 comes to 725 pages, and understanding all of it, including the details of how implementation will affect outcomes, is going to take further analysis. But here’s a general overview of what all Democratic senators are now supporting.
Corporate tax reform: The first part of the legislation actually comes under the heading of “deficit reduction.” Considering the way the media has been playing up inflation, with only occasional admissions that this is a global problem and not something just affecting the U.S., this part of the legislation allows those signing on to claim to be fighting inflation and righting corporate wrongs, even as they also address the climate crisis. The biggest item here is a corporate minimum tax of 15%, which will go a long way toward eliminating all those instances of “Corporation X made billions, but paid no taxes.” As with most tax measures, there are ways that corporations can rejigger their balance sheets to avoid portions of this tax, but the bill takes some pains in trying to close known loopholes. This measure alone is expected to raise around $370 billion
Closing the carried interest loophole: One tax dodge comes in for particular attention. The bill would end the carried interest loophole that currently allows corporations and investment managers to pay the 20% long-term capital gains tax rate on “income received as compensation” rather than what are generally much higher rates for ordinary income. The bill exempts families making under $400,000, and is expected to raise about $14 billion.
Additional funding for IRS investigations: There’s a big boost in funding for the IRS, specifically targeted at increasing investigations of tax avoidance. The bill calls for more than $48 billion to be put into the IRS over the next decade, but is expected to net gains of nearly $125 billion.
Allowing Medicare to negotiate the prices of prescription drugs: This section is long overdue in ending what amounts to an ongoing cash giveaway to pharmaceutical investors. This step alone is expected to save the federal government $288 billion, which makes the fact that it didn’t happen sooner a good source for instant anger. There are some exemptions in this legislation that allow production of some new agents, particularly the “biologics and biosimilars” that are becoming increasingly important in cancer treatment, to stay on the gravy train. For now. But out-of-pocket costs for Medicare participants is capped at $2,000. There are also consumer rebates for drug costs that go up due to inflation and a penalty for manufacturers who raise the cost of an existing drug at greater than the rate of inflation.
Taken together, these measures represent a savings that the Congressional Budget Office estimates to be $739 billion, and every one of those actions is a definitive good.
Now, here’s how the bill spends $433 billion, while reducing the deficit by over $300 billion.
Three years of subsidies for the Affordable Care Act: Tired of watching Republicans force a fight over the Affordable Care Act each year, constantly chip away at the level of subsidies, and force the surrender on some other point in order to keep people supplied with health care? Relax for the next three years, because $64 billion worth of subsidies goes on the books with this legislation.
Credits for manufacturers of renewable energy products: Right now, most solar panels are made in China, and in recent years other nations like India and Vietnam have been moving to the forefront as existing panels become commodity items searching for the lowest possible cost at every step. However, there are ways to make 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. This legislation hopes to lure both of these back to the United States with $60 billion of incentives to open new plants and expand existing plants.
Extension of tax credits for home renewables: For those who have been sweating the idea that tax credits for adding solar or other renewables at home were about to run out, that fear is ended by credits that are both extended and expanded. Credits would apply for rooftop solar and associated systems, high-efficiency heat pumps, and more. There is also $9 billion in this section for consumers who want to make their homes more energy efficient with insulation and other improvements and another $1 billion for upgrading affordable housing to use less energy. Wind and solar power providers would also get extra funding when providing power to low-income areas.
Credit for carbon sequestration: Yes, carbon capture technology has utterly failed to meet the challenge with which it is most often associated—namely, “clean coal.” That has tarnished its reputation with activists, but if we’re going to meet the goals necessary to address the climate crisis, one step is going to be figuring out ways to drastically reduce the carbon generated by things like manufacturing concrete. Manchin probably made this one of his Big Deals when negotiating over this bill, even though it’s unlikely to affect his favorite industry. Most the legislation expands the scope of existing tax credits and raises the level of subsidies.
Nuclear power tax credit: Either you think nuclear power is worse than fossil fuels and you’re going to hate this, or you think that nuclear power is a necessary part of a zero-emission strategy and you’re going to love this. Either way, there’s a subsidy here that gives nuclear energy a slight boost, but isn’t at a level where it would seem to make nuclear a competitive option for increasingly cheap renewables. Mostly, this seems like a giveaway of $0.03 / kilowatt hour to existing nuclear power plants.
Extending existing credits for ethanol and biodiesel: This is another of the existing programs where the reasons for the technology have less to do with dealing with climate change than with providing additional markets for excess agricultural goods. In short: It helps keep the corn prices up. And it will, because existing credits have been extended through 2025, but not obviously increased.
Credits 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 providing 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 continue the fight as the credits for hydrogen production and production of hydrogen vehicles have also been extended. They’ve also been modified somewhat from past credits, but since this contains a lot of details replacing points in past legislation, it’s going to take some time to figure out how.
Electric vehicle credits: The tax credits for purchasing electric vehicles have been a big factor in making the current generation of EVs affordable to consumers, and those credits were on the brink of running out. Now they’re back—and they are considerably better than before because of two factors:
- The $7,500 incentive for the purchase of new vehicles is no longer phased out after a number of vehicles is sold. That means, among other things, that you can go buy an EV with a range of 240 miles from GM at an effective price of under $20k.
- Purchasing a used EV will now come with a $4,000 credit. Getting EVs into the used vehicle chain and making them attractive has been an issue, especially with high demand sometimes making used vehicles sell for more than new. But this bill should help both get more new vehicles out there and make it more attractive to buy a used EV.
There are limits on the EV portion of the bill, including a maximum $55,000 price for a car, and a maximum of $80,000 for an SUV or truck. But there are currently a lot of vehicles below that threshold. There are also limits on the income of purchasers, which are set at $112,500 for an individual and $150,000 for a family. Those limits may be frustrating to some, but they help push the idea that this is intended to make EVs affordable to working- and middle-class families, not provide a discount for wealthy consumers purchasing a status symbol.
Overall, the CBO totals these investments at $433 billion.
The biggest factor may not be in any of the dollar totals, but in the simple word “extension” that appears over and over. That’s especially key when it comes to credits for renewable energy projects and manufacture. The biggest thing this bill gives is the kind of long-term stability that attracts investors and allows manufacturers to engage in large-scale projects. That’s a very, very important factor when it comes to finally idling remaining fossil fuel plants and building out both renewables and storage.
Is it everything we want? No. There are major programs missing, and over $300 billion being left on the table in the name of pointless deficit reduction. Every dollar of that could be going to something vital—like improving the national grid so that renewable energy can be harvested in the most effective locations and be used to provide power where it’s needed. The bill not only contains some foolish items like that West Virginia gas pipeline, and it does nothing to place new limits on fossil fuel production or clamp down on either greenhouse gases or other forms of pollution.
But is it a bill that gives America a huge shot of What It Needs? Definitely.
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