5 Things Inflation Reduction Act Will Do For CT Residents

CONNECTICUT — The Senate-approved Democratic spending bill that would deliver tax credits for clean energy household products and electric vehicles, prescription drug and health insurance savings, and other consumer benefits to Connecticut residents is expected to pass the House Friday before it heads to President Joe Biden’s desk.

The 755-page Inflation Reduction Act, as the spending bill is known, passed the Senate on a party-line vote Sunday. Sens. Chris Murphy and Richard Blumenthal voted in favor of the bill.

“People in Connecticut will see lower prescription costs and real action to fight climate change thanks to the Inflation Reduction Act,” Blumenthal tweeted. “This historic measure will combat costs, save lives and money on medicine, help save the planet, reduce the deficit and more.”

Connecticut’s Democratic House delegation is expected to vote in favor of the bill.

Rep. Rosa DeLauro, who is chair of the appropriations committee, said she looks forward to passing the bill in the House.

“The Inflation Reduction Act will help lower the cost of health care, invest in clean energy projects, tackle the climate crisis, drive down energy costs, create good-paying jobs, and forces the biggest corporations to pay taxes,” she said.

The climate, tax and health care bill calls for $433 billion in new spending that Democrats say is more than offset by $739 billion in revenue, specifically:

• $313 billion from a 15 percent corporate minimum tax
• $288 billion from prescription drug pricing reform
• $124 billion from IRS tax enforcement reform
• $14 billion from the closure of the carried interest loophole

House Speaker Nancy Pelosi praised them “landmark legislation” for “lowering kitchen table costs, reducing the cost of Americans’ health care, creating millions of good-paying jobs and addressing the climate crisis.”

Republicans panned the measure as “reckless spending” that adds “fuel to the inflation fire that is burning through Americans’ paychecks.”

Inflation cooled in July with tumbling gas prices, but Americans continued to pay more for groceries, rent and other items, according to the government’s Consumer Price Index report released Wednesday.

Here are five things Connecticut residents need to know about the bill:

Time To Plug In?

Middle- and working-class consumers — those earning $150,000 or less a year (or $300,000 for joint filers) will be eligible for tax credits of up to $7,500 for qualified new “clean” vehicles made in North America. Consumer who earn $75,000 or $150,000 for joint filers can also qualify for up to $4,000 in tax credits for buying used clean vehicles.

The current $7,500 EV tax credit phases out after a manufacturer hits 200,000 qualified sales. GM and Tesla have already hit the cap, and Toyota is expected to reach it later this year.

However, several major manufacturers have said the bill’s provisions could actually hinder EV sales, at least in the short-term. The bill requires battery production in the North America for part of the credit. Another part of the credit relies on increasingly strict mineral sourcing from North America.

EV battery manufacturing and its related mineral sourcing are dominated by China, according to the Associated Press. Several automaker companies have already announced multi-billion dollar initiatives to bring battery manufacturing to North America, but factories will take years to establish.

The Alliance for Automotive Innovation estimates that 70 percent of vehicles currently on the market wouldn’t qualify for the tax credit as soon as the bill goes into effect. Future mineral sourcing rules would render no EVs eligible for the credit, AAI CEO John Bozzella said in a statement.

“The $7500 credit might exist on paper, but no vehicles will qualify for this purchase incentive over the next few years. That’s going to be a major setback to our collective target of 40-50 percent electric vehicle sales by 2030.

GM said in a statement that the bill aligns with the company’s long-term goals, but some sourcing and manufacturing provisions will be difficult to meet in the near-term, according to CNBC.

Tax Credits For ‘Clean’ Living

The legislation increases credits from 10 percent to 30 percent for installing Energy Star products in homes and non-business properties. According to the Senate Finance Committee, such products include “solar electric, solar water heating, fuel cell, and small wind energy, and geothermal heat pumps.”

How much savings Americans would see depends on their investments in improving the energy efficiency of their homes. According to a summary from the Bipartisan Policy Center, they could claim $1,200 in tax credits annually, including $600 for energy-efficient windows and $500 for energy-efficient doors, but could claim up to $2,000 if their upgrades included biomass stoves and heat pumps.

Lower Drug Costs For Older Americans

Beginning in 2025, Medicare beneficiaries’ out-of-pocket drug expenses would be capped at $2,000. There’s no cap now, and the average Medicare recipient spent $5,460 on out-of-pocket costs in 2016, according to a study by the nonpartisan Kaiser Family Foundation.

Older Americans would also get recommended vaccines at no cost, including those for COVID-19 and shingles.

The legislation also caps monthly out-of-pocket costs for insulin at $35 per month for Medicare recipients. Senate Democrats tried to extend the cap to all Americans, but Republicans argued the Senate’s strict budget rules prohibited that, NBC News reported.

No Affordable Care Act Sticker Shock

The measure extends American Rescue Act funding through the end of 2025. Without it, the 13 million Americans who receive their health insurance on the Affordable Care Act marketplace would have faced a sharp premium hike this fall.

The extra financial help is available to people who already are eligible for subsidized health plans on the ACA Marketplace. The legislation also expands ACA subsidies to middle-class wage earners who previously couldn’t afford health insurance, according to Kaiser Family Foundation.

More Neighborhood Investments

The legislation would funnel $60 billion in grants and tax credits to improve air quality monitoring, improve transportation, and invest in clean energy in poor and vulnerable communities.

It also specifically targets neighborhoods near industrial sites. For example, it provides $1 billion in grants to improve energy efficiency in affordable housing.

Environmental justice advocates say the measure falls short of what’s needed but addresses some of the most pressing problems.