What’s in the Inflation Reduction Act?

October 1, 2022

Jay Blumenthal  -  AFM International Secretary-Treasurer

The passage of the Inflation Reduction Act has been in the news recently but what does it do?

Here are a few of the urgent issues this act’s provisions attempt to address:

1) Climate change increasingly impacts all of our lives. Storms have intensified bringing flood and wind damage that leaves death, destruction, and broken lives in its wake. Huge storms or devastating wildfires thought to be a once in a century occurrences are becoming more frequent. Large parts of the country (and the world) have experienced severe droughts.

The current water level in Lake Mead says it all. If the Colorado River fails to provide water to the southwestern states, agriculture will be severely affected. If you think vegetables have gotten more expensive at your local grocery store, imagine how the prices will increase if Southern California runs out of water! And global warming is causing unprecedented melting of glaciers around the world, creating an eventual rise in sea level. Low lying coastal areas will be the first affected, leaving major cities like New York, Miami, and New Orleans vulnerable.

The burning of fossil fuels has been, and continues to be, a major contributor to global warming. The Inflation Reduction Act is an important first step toward reducing our dependence on fossil fuels by creating incentives for the domestic production of clean energy like solar, wind, and clean hydrogen power, as well as carbon capture incentives.

The act also establishes “Make it in America” provisions for the use of American made equipment in the production of clean energy. There are also tax credits (up to $7,500) for the purchase of new electric vehicles and up to $4,000 for the purchase of used electric vehicles. These incentives will help create good paying union jobs in the clean energy and automotive sectors.

2) Health care costs and high prescription drug prices are addressed in the Inflation Reduction Act as well. It protects seniors on Medicare from large drug costs by a phase-in of a cap for out-of-pocket costs. For the first time, Medicare will be able to negotiate prices for certain high-cost drugs. Also, health insurance premium subsidies will be extended for those who avail themselves of the benefits found in the Affordable Care Act.

3) The Inflation Reduction Act addresses tax fairness. It implements paying a minimum corporate tax of 15%. Many very profitable corporations have been paying little or no federal income tax for a very long time. There is also a 1% surcharge on corporate stock buybacks.

These are a few of the many provisions in the Inflation Reduction Act. A tightening Federal Reserve is struggling to curb inflation. Higher interest rates are beginning to cool a red-hot housing market. It will take time for the provisions in the act to have the desired effect, but it is an important step in the right direction. There will be new clean energy jobs that pay prevailing wages and penalties for companies that say they pay prevailing wages, but don’t. Workers could receive the difference, plus interest! Now that would be a breath of fresh air!

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