WASHINGTON — The House of Representatives on Friday passed the Inflation Reduction Act in a party-line vote after Republicans branded it a misnamed “hoax” that would unleash an IRS crackdown without lowering four-decade-high inflation.
The bill passed 220-207 with all Democrats voting in favor and Republicans unified in opposition — just days after the Senate also passed the bill with only Democratic votes.
Democrats claim the bill will lower inflation based on projections it will raise $737 billion in new revenue, more than offsetting $437 billion in new spending.
But studies by the Penn Wharton Budget Model and the Tax Foundation say it will have little if any positive near-term effect on inflation.
“To call it the Inflation Reduction Act is a lie,” Rep. Nicole Malliotakis (R-NY) said Friday during debate on the bill.
Rep. Kevin Brady (R-Texas) argued, “This bill is a hoax on the American people.”
Biden tweeted his approval of the bill’s passage, but he did not appear in public Friday as he vacationed at a Democratic donor’s home in Kiawah Island, South Carolina.
“Today, the American people won. Special interests lost,” Biden tweeted. “With the passage of the Inflation Reduction Act in the House, families will see lower prescription drug prices, lower health care costs, and lower energy costs. I look forward to signing it into law next week.”
The 730-page spending package calls for $437 billion in estimated new spending, $369 billion of it for environmental projects, including:
- $7,500 tax credits for buyers of new electric cars and $4,000 for used models
- $62 billion for initiatives to support domestic manufacturing of solar panels, wind turbines, batteries, electric cars and the processing of rare minerals
- $30 billion in grants and loans for states and electric companies to transition away from fossil fuels
- $27 billion for Greenhouse Gas Reduction Fund “climate bank” managed by the Environmental Protection Agency to invest in green-energy companies
- $20 billion for the Department of Agriculture’s Natural Resources Conservation Service to promote “climate-smart” farming
- $10 billion to improve energy efficiency in lower-income homes
- $9 billion for federal procurement of “clean technologies” including $3 billion for the US Postal Service electric vehicles
- $6 billion for new Advanced Industrial Facilities Deployment Program to reduce emissions at chemical, steel and cement plants
- $3 billion for Environmental and Climate Justice Block Grants program to back “community-led” programs in “disadvantaged” areas
- $3 billion for Neighborhood Access and Equity Grants to “support neighborhood equity, safety, and affordable transportation access”
- $3 billion for zero-emission equipment and technology at ports
- $1.5 billion to plant trees and expand urban green spaces
- Extends through 2025 more generous COVID-19-era Obamacare subsidies. People earning up to 150% of the federal poverty level can get health insurance for $0 through Obamacare exchanges. Higher earners can get coverage for 8.5% of income
- The legislation also imposes a $35 cap on out-of-pocket insulin costs for Medicare patients.
- $4 billion for Western wildfire resilience, added at the request of centrist Sen. Kyrsten Sinema (D-Ariz.) a key vote for passage.
Democrats say that spending will be offset by $737 billion in new revenue, including:
- $222 billion from a new 15% corporate minimum tax
- $124 billion in new IRS revenue through stricter enforcement after $80 billion in new funding for the agency
- $74 billion from a new 1% stock buyback excise tax
- $52 billion by extending a limit on how businesses can use losses to reduce taxes
- $265 billion in savings by allowing Medicare to negotiate drug prices
- Potentially up to $6 billion in new fines for methane leaks
Republicans took turns slamming provisions in the bill, focusing heavily on $80 billion in new funding for the IRS, alleging agents would target people such as teachers with summer jobs and small-business owners, rather than wealthy people who arguably underpaid their tax bill, such as President Biden, against whom enforcement may require years of litigation.
Treasury Secretary Janet Yellen claimed Wednesday that new IRS funding won’t boost audits on people who earn less than $400,000 per year — in a nod to Biden’s vow not to increase taxes on lower and middle-income people. But Republicans said that’s untrue and that the IRS, an independent agency, would go after anyone suspected of owing taxes.
“Just a few hours ago, we got this and it was a confirmation that the IRS agents will be getting about $20 billion in new taxes from people making less than $400,000,” House Minority Whip Steve Scalise (R-La.) said, waving a print-out of a Congressional Budget Office estimate of the impact through fiscal 2031.
“That’s right. the CBO just confirmed it a few hours ago,” Scalise said. “President Biden made that promise multiple times, ‘if you make under $400,000, don’t worry, your taxes won’t go up.’ This bill breaks President Biden’s promise. It’s confirmed by the CBO and there was an amendment to stop it from happening and every Democrat voted against it.”
The precise number of new IRS agents is in dispute — with Republicans citing an estimate of 87,000 and Democrats saying it would be far fewer.
Rep. Jim Jordan (R-Ohio) said the IRS was untrustworthy and politically biased, pointing to an Obama administration scandal over the targeting of conservative groups.
“Who are these thousands of IRS bureaucrats — left-wing bureaucrats, Louis Lerners at the IRS? Who are they going to harass? Middle-class families,” Jordan said.
“We know who it’s going to be. It’s an assistant football coach at the local high school who teaches history who’s got the side business in most lawns in the summer. He paints houses in the summer, he pays his taxes, but he’s gonna get harassed. We know how this works.”
Rep. Fred Upton (R-Mich.) predicted a disproportionate impact on small businesses.
“They’re gonna throw more than $80 billion to hire more agents who are going to be tasked with hounding taxpayers who report pass-through business income through Schedule C and Schedule E,” Upton said. “These folks are by and large middle income family owned small businesses owners who busted their butts to keep their doors open through the pandemic and now we’re sending the cavalry after them, leading to higher compliance costs and time wasted. That’s going to increase costs for all Americans.”
Democrats, meanwhile, spent much of their House floor debate time heralding the bill’s possible impact on reducing the risk of global warming.
Rep. Anna Eschoo (D-Calif.) said it was “a Hallelujah Day” because “taking on the climate crisis is absolutely essential.”
Rep. Sean Casten (D-Ill.) reminisced about attending an anti-global warming conference last year in Glasgow, Scotland.
“We told the world that we were back. We’d rejoined the Paris Climate Accord. We were committed to building back better. We were committed to putting science over politics. It felt pretty good. But to be blunt, the world didn’t believe us,” Casten said.
Now, he said, “We’re about to pass the most impactful climate bill ever. You all should be proud of that — you were here to share this moment with us. We’re on the path to reduce CO2 emissions by 40% by 2030. That is a really big deal.”
Some Democrats, such as Rep. Nydia Velazquez (D-NY) said the bill wasn’t big enough.
“The climate crisis is the single most important issue facing our future, the future we will all share, Democrats and Republicans,” she said. “I understand this is a downpayment on climate action. And more needs to be done.”
In closing arguments, House Speaker Nancy Pelosi (D-Calif.) argued that the bill’s controversial IRS funding would target the “wealthiest avoiders of taxes.”
“I urge every member to put aside their misunderstanding of this and vote for the Inflation Reduction Act, as we send this historic legislation to President Biden’s desk,” Pelosi said.
“How can you vote against lowering healthcare costs and prescription drugs costs for seniors and underserved communities as we continue to fight inflation?” Pelosi said. “How can you vote with PhRMA at the cost of America’s seniors and America’s working families? How can you vote against protecting future generations from rising sea levels, raging wildfires and crippling droughts? How can you vote against reducing the deficit or asking billionaires and companies and the wealthiest avoiders of taxes to pay their fair share?”
But House Minority Leader Kevin McCarthy (R-Calif.), in his own closing remarks, blasted the fact that about 80 Democrats chose to vote by proxy on the bill because they “can’t be personally bothered to show up.”
McCarthy said that “based upon the past numbers, we know [new IRS funding] would mean 710,000 new audits for people who make under $75,000.”
“A vote for this bill is about to help the well-connected get further and further ahead, while leaving the needs of hardworking families behind,” McCarthy said. “Your pocketbook is their plan to fund more inflationary spending.”
McCarthy noted that economists believe Democrats’ $1.9 trillion American Rescue Plan Act, approved last year, sent inflation soaring to the highest rates since 1981. The annual inflation rate hit 9.1% in June before nudging slightly lower to 8.5% in July.
“When you say that you’re not going to go after every American to audit, you’re not being honest,” McCarthy said. “Just like you’re not being honest about what you did to cause the pain to this country. And you have no plan to solve it. You simply double down to the exact same thing you did before.”
