(Bloomberg) — House Democrats cast the final votes needed to send a slimmed-down version of President Joe Biden’s tax, climate and drug pricing agenda, ending a year of infighting and giving themselves a key boost to campaign for November’s congressional elections. .
The legislation passed the House on Friday in a 220-207 vote along party lines. Biden tweeted that he would sign next week.
The bill passed the Senate on Sunday on a 51 to 50 vote and Vice President Kamala Harris broke the tie, and Speaker Nancy Pelosi was unable to get more than a few defections with the slim Democratic majority in the House. Given the high stakes, Biden personally called lawmakers throughout the week to ensure support in the House, a White House official said.
In the end, Democrats voted unanimously for the bill, even though it cost less than the $10 trillion measure that progressives like Alexandria Ocasio-Cortez of New York had initially dismissed. It does not raise the $10,000 limit on the deduction for state and local tax or SALT, which is moderated by high-tax states.
Ultimately the bill would spend about $437 billion on climate, health subsidies and drought relief, and raise about $740 billion in revenue over ten years. The nonpartisan Congressional Budget Office estimated an earlier version of the bill would cut the deficit by $102 billion over ten years, adding up to $300 billion in revenue from the expanded tax audit.
Whether the bill helps Democrats retain their House majority remains to be seen. The party’s core voters feel emboldened by the largest climate change bill in US history, while seniors cheer the arrival of lower drug costs.
“I have prepared to win the interval all along. It depends on the turnout. It might be helpful. I don’t know,” House Speaker Nancy Pelosi said this week. “But I know it’s helpful for America’s working families, and that’s our mission.”
Independent studies say the bill will have a limited impact on inflation, even as Democrats name it. A new Penn Wharton study found the bill would reduce inflation by 0.1 percentage points after five years and have no effect after 2028. In the near term, the effects will be upward pressure on inflation but the government is “too small” to measure.
The impact will be immediate for middle-class Obamacare enrollees and seniors with expensive drugs.
Republicans argue that imposing new taxes on business could worsen a recession triggered by the Federal Reserve raising interest rates to fight inflation. GOP lawmakers, who blame historic inflation in last year’s stimulus bill, argue that the bill’s tax breaks for pricey electric vehicles are a boon to the upper-middle class, while the drug provision stifles innovation in the pharmaceutical industry.
Rep. Kevin Brady, Republican of Texas, said Democrats are “desperate for any win that will slow the economy and crush businesses.”
He said the GOP would work to repeal tax increases and drug price changes if the party wins the House next year, and would try to shift the extra IRS money in the bill to consumer service instead of increasing audits.
Democrats said they would try to pass aspects of Biden’s social agenda that did not make it into the final version of the bill next year if he keeps the House and expands his Senate majority. He will again seek to expand Medicare and Medicaid, increase child tax credits and childcare subsidies, and provide paid family leave. Ways and Means Chairman Richard Neal said on Friday that Democrats will look to raise the corporate tax rate paid by the wealthy and the top individual tax rate next year.
Key business implications of the bill that passed the House:
- 15% marginal tax on corporations with revenues over $1 billion, except for accelerated depreciation and private equity subsidiaries in 2023. Collects $222 billion.
- A 1% excise tax on share buybacks effective January 1 to raise $74 billion.
- $80 billion boost to Internal Revenue Service budget to hire more agents, upgrade technology to increase revenue collection
- An expansion of the debt loss limitation tax breaks from the Trump tax package
- New Superfund taxes on oil companies
- For the first time, drug prices were negotiated by Medicare, with tax penalties imposed on drug companies that failed to comply with the new pricing. Price negotiations will begin with 10 high-priced drugs in 2026. Medicare is penalized for price gouging in sales.
- $2,000 per year limit on out-of-pocket costs for seniors enrolled in Medicare drug plans
- Approximately $374 billion in energy and climate-related provisions, including tax incentives for green energy projects, a $7,500 tax credit for purchasing new electric vehicles and a $4,000 credit for used EVs. Limits imposed on supply chain sourcing for qualifying EVs
- A three-year extension of subsidies for Obamacare premiums, preventing the expiration of subsidies in 2023.
More stories like this are available at bloomberg.com
©2022 Bloomberg LP