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What is the Inflation Reduction Act of 2022?
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The Inflation Reduction Act of 2022 is a landmark United States federal law enacted on August 16, 2022, designed to lower healthcare costs, address climate change, and raise taxes on large corporations. It represents the most significant climate legislation in U.S.history and aims to reduce the federal deficit.
The ActS provisions span a wide range of policy areas, including prescription drug pricing reform, clean energy tax credits, and investments in climate resilience. It’s officially designated as Public Law 117-169. The Congressional Budget Office (CBO) initially estimated the Act would reduce the deficit by $300 billion over ten years,though subsequent analyses have varied.
For example, the Act allows Medicare to negotiate the prices of certain prescription drugs, a change expected to lower costs for seniors. CMS Fact Sheet: Inflation Reduction Act Lowering Prescription Drug Costs
Key Provisions of the Inflation Reduction Act
Healthcare Costs
The Inflation Reduction Act directly addresses healthcare costs, primarily through allowing Medicare to negotiate prescription drug prices. This provision is expected to save the federal government billions of dollars and lower out-of-pocket expenses for Medicare beneficiaries.
Specifically, the Act authorizes Medicare to negotiate the prices of 10 high-cost drugs beginning in 2026, with the number increasing over time. It also caps monthly insulin costs for Medicare beneficiaries at $35.These changes are outlined in detail by the House committee on Energy and Commerce.
As of January 2024, the Department of Health and Human Services (HHS) announced the first 10 drugs selected for Medicare price negotiation, scheduled to take effect in 2026. HHS Proclamation
Climate Change and Energy
A considerable portion of the Inflation Reduction Act is dedicated to combating climate change and promoting clean energy. The Act provides tax credits and incentives for investments in renewable energy sources, energy efficiency, and electric vehicles.
The law includes over $369 billion in funding for climate and energy programs, including tax credits for solar and wind power, investments in clean energy manufacturing, and grants for state and local governments to reduce emissions. The Department of Energy’s Inflation Reduction act webpage provides a thorough overview of these investments.
As an example, the Act offers a tax credit of up to $7,500 for the purchase of a new electric vehicle, subject to certain requirements regarding battery sourcing and manufacturing. IRS Clean Vehicle Credits
Tax Provisions
The Inflation Reduction Act aims to raise revenue through increased tax enforcement and a 15% minimum tax on corporations with over $1 billion in profits. These provisions are intended to ensure that large corporations pay their fair share of taxes.
The corporate minimum tax, officially known as the corporate alternative minimum tax (CAMT), applies to corporations with average annual financial statement income exceeding $1 billion. The Joint committee on Taxation estimates this will generate approximately $220 billion in revenue over ten years. Joint Committee on Taxation Analysis
The IRS is receiving significant funding through the Act to improve tax enforcement, with an estimated $80 billion allocated to bolster its capabilities. Treasury Department Strategic Plan
current Status (as of January 27, 2026)
As of January 27, 2026, the Inflation Reduction Act continues to be implemented, with ongoing effects on healthcare costs, clean energy investments, and corporate taxation. While initial projections regarding deficit
