- The Inflation Reduction Act will not stop inflation immediately but will impact taxes and more.
- Corporations will now face a 15% flat tax rate on their yearly income.
- For individuals, there will be benefits in the form of health care protections and even the lowering of prescription drug costs.
- It will also incentivize investment in green energy in items such as electric vehicles, solar panels, and more.
With inflation being so significant and part of everybody’s lives, it’s about time that legislation is passed to try and reduce precisely what is causing people to struggle financially. However, despite the name, many things are included in this bill that people might not know about. Many of these included items have a drastic impact on the average American.
This article is going to examine the new Inflation Reduction Act that was passed earlier this month to see whether this will impact you. Suppose you have any questions about this legislation. In that case, this article will seek to answer everything that could be unclear to you, helping you to understand what this means for you and your future and whether or not it will help to reduce inflation in the end.
What is the Inflation Reduction Act?
The Inflation Reduction Act was passed on August 16th of this year, and it’s a major democratic bill passed to help raise taxes on the rich and further the social and climate policies that would help people embrace an eco-friendlier world.
Additionally, this legislation is said to focus on reducing certain costs, including a new price cap on specific drugs and even a limitation on out-of-pocket expenses for insurance purposes. There are multiple other concerns addressed in this legislation that people might not have heard about either.
To further understand what this bill means for you, here are a few specific areas it focused on and precisely what this means for those in the business world and their personal lives.
The Raising of Corporate Taxes
Corporate taxes were raised due to this bill, with a minimum corporate tax rate increasing to 15%. This will cause a little bit of a challenge for many corporations. Many companies have already announced that they are looking to lay off specific individuals in their workforce because inflation. Additionally, some have said that this new act has made it harder for them to retain all their employees.
Despite what people have said, this will not increase taxes on the middle class. Instead, economists call it the taxing the rich bill in some cases due to the emphasis on corporate taxation above all else.
Lowering the Cost of Prescription Drugs
Another important aspect of this bill is lowering prescription drugs and their costs. This is related to the prescription drug price reform that is happening currently in the country and the new $2000 cap on out-of-pocket prescription drugs and their costs for many individuals who are on Medicare.
This is a huge success, but it will not come until 2025 when it is officially put through and enacted throughout the country. This is a significant step in the right direction, but it won’t impact you directly at this time.
IRS Tax Enforcement
Another essential part of this legislation is the new IRS tax enforcement that has allowed for new proper funding and more people working in the system. Many people have probably seen that nearly 80,000 individuals are being hired for the IRS this year.
This will help ensure that income taxes are properly paid and accounted for by all individuals, not just the middle class or the lower class. It will ensure proper taxes are paid yearly, even by the wealthiest Americans in America or the largest companies.
Extension of Affordable Care Act (ACA) Subsidies
Another important aspect of this legislation is the ACA subsidy extensions. These were originally not meant to happen, but they have been extended through 2025 to help with ensuring that all individuals have insurance.
This is essentially what has helped millions of Americans get health insurance privately as opposed to through their employment. This is a significant part of the legislation and a massive benefit to those currently working and using these insurance programs. They will be continued, and hopefully permanently part of the healthcare industry after 2025.
Energy Security and Climate Change Initiatives
Another essential part of this legislation is the energy security and climate change investments that are being created to help with supporting the climate. For example, additional tax credits will be allowed for electric vehicles, solar panels, and multiple other individual expenses that individuals have been able to invest in over the years.
These are, in part, to incentivize the efforts of individuals towards fewer carbon emissions, as well as the investments that individuals have made that will further the mission of America’s current administration. Those who have installed solar panels and bought a Tesla as their vehicle will see incentives!
Impact on the National Deficit
One of the most important benefits for the nation that is covered in this bill would be the impact on the national deficit, which is meant to go down with this legislation’s initiatives.
Many people state it will reduce the country’s fiscal deficit by $102 billion in the next nine years. For those monitoring the national debt, this is a significant win for the country! It would drastically impact the health of the nation and the federal government.
The Long-Term Impact of the Inflation Reduction Act on You
Overall, the long-term implication of the new legislation being passed is simply a matter of seeing a reduction in the rate of inflation over time, not in the immediate future. With consumer prices as high as they could be right now, this will only help the American people, and economists have stated the benefits of this legislation for long-term national growth and consumer markets.
For more information about how this legislation and other new government initiatives will affect you, check our website frequently to learn more about all things finance and to further your own economic prosperity for you and your family.