Spending a total of $433 billion on climate change, energy security, and drug price cuts
Funding by levying at least 15% corporate tax
High-income earners, private equity funds, as winners… Pharmaceutical companies and big tech take a hit
▲ Senate Minority Leader Chuck Schumer of the US Democratic Party holds a press conference after the Inflation Reduction Act was passed in the Senate on the 6th (local time). Washington DC/EPA Yonhap News
The so-called “Inflation Reduction Act,” which the Joe Biden administration and Democrats have been pushing for for nearly a year and a half, has passed the Senate.
According to Bloomberg News on the 7th (local time), all 50 Republican senators are ‘inflationIt was voted 50-50 against the appropriations and revenue bill called the ‘Reduction Act’, but it was eventually passed 51-50 with Vice President Kamala Harris’ casting boat.
A vote in the House of Representatives is still pending, but the Democrats hold the majority of the seats, so it is expected to pass smoothly.
The ‘Inflation Reduction Act’ is accompanied by a $433 billion fiscal expenditure plan, including an investment of $369 billion (about KRW 482 trillion) in energy security and climate change response, and an investment of $64 billion in the National Health Insurance Service to reduce drug costs. In terms of financing, the main goal is to impose a corporate tax of at least 15% on large corporations.
In the ‘Energy Security and Climate Change Measures’ section, tax credits are provided when low- and middle-income earners purchase eco-friendly vehicles such as electric vehicles. For example, if you buy a used electric vehicle, you get a $4,000 tax credit and a new car gets a $7,500 tax credit. Subsidies for eco-friendly houses, such as solar panel installation, were also included in the bill.
It also includes plans to limit the out-of-pocket for senior citizens to $2,000 per year under Medicare, a public health insurance, and extend Obamacare health insurance subsidies for three years.
What is noteworthy is that in the field of appropriation, support measures for oil and gas development are included. It is said to encourage energy drilling by lending land owned by the federal government to oil and gas producers for the next 10 years. Analysts say that it is a compromise between the intentions of Senator Joe Manchin, who has a coal-producing region as his constituency, and the government’s will to curb inflation caused by rising energy prices.
In the area of revenue to secure financial resources, the key is to impose a minimum corporate tax of 15% on large enterprises. The federal corporate tax rate is 21%, but companies with annual revenues of $1 billion or more would be subject to a minimum 15% corporate tax. A new plan was also introduced to impose a 1% tax on corporate share repurchases. It also includes measures to strengthen the tax collection capacity of the National Tax Service.
Democrats expect the bill to cut the federal deficit by more than $300 billion. It is the logic that the cost of US households will be reduced by the amount of the input budget, and the fiscal deficit will also decrease, which will help alleviate inflation.
▲ U.S. President Joe Biden answers questions from reporters at the White House on the 7th (local time). Washington DC/AFP Yonhap News
Although the “Better Rebuild” (BBB) bill proposed last year was reduced or amended, it is evaluated that the passage of the bill will allow President Biden to relax before the midterm elections in November.
As the bill was revised over the 18 months it was passed, the winners and losers also changed. Bloomberg evaluated that the high-income bracket, which was expected to be hit hard in the early stages of the bill, is considered to be the beneficiary of the bill.
Initially, President Biden proposed a plan to significantly increase the capital gains tax on individuals with capital gains of $1 million or more on assets held for one year or more from 20% to 39.6%, but Democrat Kirsten Cinemas fiercely opposed the plan. Folded.
Private equity funds have also benefited from an exception to the 15% minimum corporate tax for companies they own.
Rep. Jo Manchin and Cinema Rep. who passed through amendments to the existing BBB bill are also evaluated as winners. In addition, electric vehicle manufacturers, the renewable energy industry, oil companies, Obamacare subscribers, and the National Tax Service are also expected to benefit.
Among the losers are the Republican Party, which failed to block the passage of the bill, pharmaceutical companies that are close to negotiating drug prices, and big tech companies whose tax burden has increased due to new taxation on treasury stock purchases.