As you may have seen the government passed a bill and while it's intended to target inflation it will have a much wider impact on other areas including your own life. See below for a breakdown of some the key changes that are to come of this new bill.
· Energy & Climate Change Tax Credit
- Installing energy-efficient windows, heat pumps, solar panels, or newer appliances can lead to a possible 30% tax credit.
- Includes a $14,000 rebate for buying heat pumps or other energy-efficient home appliances.
- Projection of $9,000 of savings in energy bills by installing solar panels.
- The tax credits for new electric vehicles rises to $7,500 while the credit for a used electric vehicle is $4,000. You may also get credits for installing an electric vehicle charging station.
· Health Care Changes
- There is a new drug price inflation cap of $2,000 per year that will apply to Americans with Medicare impacting 1.4 million people.
- The Affordable Care Act in 2010 included a subsidy for health insurance costs that was scheduled to end in the fall but will be extended for 3 years at an estimated cost of $64 billion.
- Allows Medicare to negotiate lower prices for 10 high-cost drugs starting in 2026 and then that increases to 20 drugs by 2029 which is huge piece of the bill that will not be immediately felt.
· Oil Drilling
- There will be more opportunities for oil production, new areas to drill, and incentivizing "carbon capture" technology. This could be one of the immediate impacts of inflation given the rise we saw in oil prices earlier in the year.
- Creates a 15% corporate alternative minimum tax on companies making more than $1 billion per year.
- Imposes a 1% tax on all corporate share buybacks.
- Increased investment into the IRS ($80B) will increase enforcement and will allow the IRS to be more equipped to identify those who cheat on their taxes as well as increase the amount of audits each year.
· Inflation Impact
- Though in the title of the bill it is expected to have a modest impact of inflation if at all. Many models predict inflation to continue climbing into 24 until declining shortly thereafter.
Though the title of the bill has inflation reduction it is expected to have a modest impact on inflation according to the Penn Wharton Budget Model. It however should reduce the deficit although the amount has some variation, but it is good to see that things can still get done in Washington even if everyone is not on board.