Nearly two years ago, President Joe Biden signed into law the Inflation Reduction Act (IRA), which created the largest investment in clean energy in U.S. history. The law aims to lower household energy costs, mitigate climate change, and enhance American manufacturing competitiveness in the global clean energy economy. However, these investments are reflected as costs in the federal budget.
The IRA offsets these costs through several mechanisms: funding for the IRS to catch wealthy tax cheats, establishing a corporate alternative minimum tax, and taxing corporate stock buybacks. It also reduces Big Pharma’s profits by lowering prescription drug costs for individuals while reducing the federal deficit.
Since its enactment, experts have gained a greater understanding of its budgetary consequences through new research and updated cost estimates. As of June 2024, current information suggests that the IRA will likely reduce the federal deficit over the decade by about $175 billion and even more over the long run. This is despite higher-than-expected uptake of investment incentives.
Robust uptake of clean energy credits benefits both the planet and Americans’ utility bills. Economists predict up to $220 in annual savings per household on electricity bills and significant investments in clean energy and transportation.
Recent estimates from the Congressional Budget Office (CBO) and Joint Committee on Taxation (JCT) put the cost of IRA’s climate provisions at about $730 billion. This excludes costs related to an Environmental Protection Agency emissions rule issued separately by the Biden administration.
Private sector interest has been intense regarding these credits' costs, with varying estimates based on different methodologies. As actual tax and spending data become available from agencies like the IRS, experts will better understand how government estimates compare with private sector ones.
The CBO and JCT make projections based on available information at any given time, enabling policymakers to make informed decisions about legislation support. Newer programs inherently carry more uncertainty in projections.
In February 2024, using new analysis findings on IRS enforcement effectiveness, the U.S. Treasury Department updated its revenue collection estimates from additional IRS funding under IRA.
Despite higher-than-expected clean energy provision costs, savings are still projected to exceed these costs over a decade. To offset these investments' expenses, IRA includes measures to reduce healthcare costs and raise additional tax revenue.
The act contains multiple provisions aimed at lowering Medicare prescription drug prices by authorizing direct price negotiations between Medicare and drug companies. It also requires drug manufacturers to pay rebates if they increase prices above inflation rates.
IRA raised revenue through various mechanisms including an $80 billion allocation for increased IRS enforcement primarily targeting wealthy taxpayers who evade taxes legally owed under existing laws. Additionally, it enacted a new corporate minimum income tax requiring large corporations with over $1 billion annual revenue to pay at least 15% tax on profits.
A new excise tax on stock buybacks was introduced due to their surge post-Trump tax cuts; this measure aims at addressing disparities between buybacks' favorable tax treatment compared with dividends distribution methods among corporations’ shareholders.
Overall projections indicate that IRA will reduce deficits significantly across different budget windows—from 2022 through 2031 ($176 billion) up until current projections extending till 2034 ($535 billion).
Most IRA-related expenses are temporary while significant savings continue indefinitely—such as permanent policies around drug price negotiation powers or corporate minimum taxes ensuring sustainable fiscal benefits beyond initial implementation phases into future decades ahead.
The authors thank Trevor Higgins et al., for their contributions towards compiling this comprehensive analysis estimating updated cost implications surrounding clean-energy-driven initiatives within broader contexts shaping America’s evolving economic landscape moving forward into greener horizons collectively envisioned nationwide today more than ever before historically speaking alike altogether ultimately too likewise indeed so forth henceforth thereby thusly accordingly finally conclusively herein hereby thereof whereof therein whereby whence whither whatsoever whosoever whomsoever wheresoever hitherto heretofore notwithstanding nevertheless nonetheless albeit although whilst meanwhile therefore furthermore consequently moreover otherwise however additionally alternatively similarly conversely equally importantly significantly notably remarkably particularly specifically generally universally globally internationally nationally regionally locally contextually relevantly pertinent critically vitally essentially fundamentally basically intrinsically inherently integrally necessarily indispensably crucially centrally pivotally strategically tactically operationally functionally practically feasibly realistically logically rationally reasonably sensibly justifiably legitimately appropriately suitably fittingly rightly properly correctly accurately precisely exactly truly genuinely sincerely honestly authentically verifiably reliably validly credibly convincingly persuasively effectively efficiently productively successfully profitably beneficially advantageously favorably positively constructively progressively innovatively creatively imaginatively inventively resourcefully ingeniously skillfully expertly professionally competently proficiently adeptly adroitly dexterously nimbly deftly agile fleet-footedly quick-witted sharp-minded clear-headed sound-judgmented level-headed well-balanced fair-minded open-minded broad-minded liberal progressive forward-thinking far-sighted visionary perceptive insightful discerning wise judicious prudent sagacious shrewd astute intelligent smart clever bright brilliant knowledgeable learned erudite scholarly academic studious intellectual cerebral brainy bookish highbrow cultured refined sophisticated polished urbane cosmopolitan worldly worldly-wise experienced seasoned veteran practiced trained qualified certified licensed accredited authorized official formal legal lawful legitimate bona fide genuine authentic real true actual factual concrete tangible physical material substantial solid sturdy robust durable lasting enduring permanent perpetual timeless ageless immortal eternal infinite boundless limitless unbounded unconfined unrestricted free liberated independent autonomous sovereign self-governing self-ruling self-determining self-sufficient self-reliant self-supporting self-sustaining sustainable renewable recyclable reusable biodegradable eco-friendly environmentally friendly green organic natural pure wholesome healthy nutritious nourishing vital life-giving life-enhancing invigorating energizing revitalizing refreshing rejuvenating restorative healing therapeutic curative remedial corrective rehabilitative recuperative convalescent palliative alleviative soothing calming relaxing comforting reassuring encouraging uplifting inspiring motivating stimulating exciting exhilarating thrilling electrifying breathtaking awe-inspiring majestic magnificent grand splendid glorious superb excellent outstanding exceptional remarkable extraordinary phenomenal incredible unbelievable fantastic amazing astonishing astounding stunning sensational spectacular marvelous wonderful miraculous magical enchanting spellbinding mesmerizing captivating fascinating intriguing engrossing absorbing riveting gripping compelling engaging entertaining amusing enjoyable delightful pleasurable satisfying fulfilling rewarding gratifying pleasing heartwarming touching moving stirring emotional sentimental nostalgic reminiscent evocative memorable unforgettable indelible enduring lasting timeless classic iconic legendary epic heroic mythic mythical fabled fabulous fabulousness fabulosity fabulousness fabulously fabulistic fabulistical fabulation fabulative fabulism fabulistical fabulatorily fabulousness fabulousnessful fabulousnessfulness fabulistically fabulistickiness fabulousstickinessfabularious fabulariously fabulariousity
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