Inflation Reduction Act: 5 Ways It Will Impact NJ

NEW JERSEY — 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 New Jersey residents is expected to pass the House Friday before it heads to President Joe Biden’s desk.

But efforts to include the restoration of a key tax break for New Jerseyans failed.

The 755-page Inflation Reduction Act, as the spending bill is known, passed the Senate on a party-line vote Sunday. Sens. Cory Booker and Bob Menendez — both New Jersey Democrats — supported the bill.

Several House Democrats representing New Jersey have pushed to remove or increase the $10,000 cap on state and local tax (SALT) deductions. Reps. Josh Gottheimer (NJ-5) and Mikie Sherrill (NJ-11) pledged "no SALT, no deal" but have since expressed support for the bill.

Sherrill said she supports the bill because of its investments in clean energy and "good-paying jobs," allowing Medicare to negotiate costs on prescription drug prices, and its minimum tax on corporations. Gottheimer expressed support for the bill because it doesn't raise taxes in his district and marks a "huge win" for lowering prescription drug prices and boosting manufacturing.

Rep. Jeff Van Drew (NJ-2) — one of two Republicans in New Jersey's House delegation — opposes the bill. He specifically pointed out a provision that allocates $80 million to hire 87,000 new Internal Revenue Service agents.

"We are in the middle of a recession," Van Drew said in a statement. "There is no reason that taxpayer dollars need to go towards hiring an IRS army that will only end up targeting hard-working Americans who are just trying to afford gas and groceries."

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

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 New Jersey residents need to know about the bill:

Time To Plug In?

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.

Among those qualifying for the maximum credit are vehicles made by General Motors and Tesla; the less efficient the vehicle, the lower the tax credit, NBC reported.

Prices for electric vehicles have gone up, averaging $54,000 as demand and costs for materials soar, according to AutoBlog.

Tax Credits For ‘Clean’ Living

The legislation increases credits from 10 percent to 30 percent for installing Energy Star products in homes and nonbusiness 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.

No Affordable Care Act Sticker Shock

The measure extends Affordable Care 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.