By LISA MASCARO – AP Congressional Correspondent
WASHINGTON (AP) — It doesn’t come close to the $4 trillion proposal that President Joe Biden first launched to rebuild America’s public infrastructure and family support systems, but the compromise package of inflation-fighting strategies for health care, climate change and deficit reduction looks like way to the Senate votes this weekend.
The proposal of an estimated $740 billion, struck by two top negotiators, Senate Leader Chuck Schumer and Senator Joe Manchin, the conservative Democrat from West Virginia, contains some hard-won party priorities. But the final touches this week came from Senator Kyrsten Sinema, D-Ariz., who put her handiwork on the latest revisions.
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What’s in and out of the Democrats’ “Inflation Reduction Act of 2022” as it stands now:
LOWER DRUG COSTS ON PRESCRIPTION
The bill launches a long-sought goal and allows the Medicare program to negotiate prescription drug prices with drug companies, saving the federal government about $288 billion over the 10-year budget window.
That new revenue would be put back into lower costs for seniors taking medications, including a $2,000 cash cap for older adults who buy prescriptions from pharmacies.
The money would also be used for free vaccinations for seniors, who are now one of the few not to have free access, according to a summary document.
PAYING HELP FOR HEALTH INSURANCE
The bill would expand subsidies provided during the COVID-19 pandemic to help some Americans who are self-funding.
With previous pandemic aid, the extra aid would expire this year. But the bill would allow aid to continue for another three years, reducing insurance premiums for people who buy their own health insurance policies.
‘A BIGGEST INVESTMENT IN CLIMATE CHANGE IN US HISTORY’
The bill would invest $369 billion in climate change mitigation strategies over the decade, including investments in renewable energy production and tax credits for consumers to buy new or used electric vehicles.
It is split into $60 billion for a tax credit for clean energy production and $30 billion for a production tax credit for wind and solar energy, seen as ways to boost and support the industries that can help reduce the country’s reliance on curb fossil fuels.
For consumers, there are tax breaks as an incentive to go green. One of these is a 10-year consumer discount for renewable energy investments in wind and solar. There are tax benefits for buying electric vehicles, including a $4,000 tax credit for the purchase of used electric vehicles and $7,500 for new ones.
Overall, Democrats believe the strategy could put the country on the path to cutting greenhouse gas emissions by 40% by 2030, and would be “by far the largest climate investment in U.S. history.”
HOW TO PAY FOR ALL THIS?
The biggest revenue-boosting factor in the bill is a new 15% minimum tax for companies earning more than $1 billion in annual profits.
It’s one way to deal with some 200 U.S. companies that fail to pay the standard 21% corporate tax rate, including some that end up paying no tax at all.
The new corporate tax minimum would come into effect after tax year 2022 and bring in some $258 billion over the decade.
Revenue would have been $313 billion, but Sinema pushed for one change to the 15% corporate minimum, allowing for a depreciation deduction used by the manufacturing industry. That’s about $55 billion in total revenue.
Money is also being raised by encouraging the IRS to go after tax fraud. The bill proposes an $80 billion investment in tax administration, enforcement and modernization, which is expected to generate $203 billion in new revenue — a net profit of $124 billion over the decade.
The bill maintains Biden’s original promise not to impose taxes on families or businesses earning less than $400,000 a year.
The lower drug prices for seniors are being paid for with savings from Medicare’s negotiations with the drug companies.
WHAT HAS CHANGED IN THE RECENT DAYS?
To win over Sinema, Democrats dropped plans to plug a tax hole that wealthier Americans have long enjoyed — the so-called “carried interest,” which under current law taxes wealthy hedge fund managers and others at a 20% rate. .
The left has spent years trying to raise the carry rate, which had been raised to 37% in the original bill, more in line with higher income earners. Sinema wouldn’t allow it.
By retaining the tax break for the wealthy, the party is stripping $14 billion in revenue they had been counting on to help pay for the package.
Instead, with Sinema’s nod, Democrats will impose a 1% tax on share buybacks, which have brought in some $74 billion over the past decade.
EXTRA MONEY TO PAY REFUNDS
With about $740 billion in new revenue and about $433 billion in new investment, the bill promises to make a difference toward deficit reduction.
Federal deficits rose during the COVID-19 pandemic as federal spending rose and tax revenues fell as the country’s economy churned through closures, closed offices and other massive changes.
The nation has seen deficits rise and fall in recent years. But overall federal budgeting is on an unsustainable path, according to the Congressional Budget Office, which released a new report this week on long-term projections.
This latest package after 18 months of start-stop negotiations leaves many of Biden’s more ambitious goals behind.
While Congress passed a $1 trillion bipartisan infrastructure bill covering highways, broadband and other investments that Biden signed into law last year, the president’s and party’s other key priorities have slipped.
Among them is a continuation of a $300 monthly child tax credit that sent money directly to families during the pandemic and is believed to have greatly reduced child poverty.
For now, plans for free kindergarten and community college have also disappeared, as well as the country’s first paid family leave program that would have provided up to $4,000 a month for births, deaths and other critical needs.
Associated Press writer Matthew Daly contributed to this report.
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