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September 1, 2022

๐™๐™๐™š ๐™„๐™ฃ๐™›๐™ก๐™–๐™ฉ๐™ž๐™ค๐™ฃ ๐™๐™š๐™™๐™ช๐™˜๐™ฉ๐™ž๐™ค๐™ฃ ๐˜ผ๐™˜๐™ฉ ๐™„๐™จ ๐™‰๐™ค๐™ฌ ๐™‡๐™–๐™ฌโ€”



President Biden signed the Inflation Reduction Act of 2022 into law on Aug. 16. The Inflation Reduction Act is a very slimmed-down version of the Build Back Better bill, which President Biden has been trying to pass. Two major achievements of the new bill โ€“ 1) large investment in combating climate change; and 2) lower cost of prescription drugs.
๐’๐ฎ๐ฆ๐ฆ๐š๐ซ๐ฒ ๐จ๐Ÿ ๐ญ๐ก๐ž ๐ฆ๐š๐ฃ๐จ๐ซ ๐ฉ๐ซ๐จ๐ฏ๐ข๐ฌ๐ข๐จ๐ง๐ฌ ๐จ๐Ÿ ๐ญ๐ก๐ž ๐›๐ข๐ฅ๐ฅ:

  1. Creation of a 15% corporate minimum tax rate: Corporations with at least $1 billion in income will have a new tax rate of 15%.
  2. Corporate Stock buybacks: Stock buybacks by corporations will face a 1% excise tax.
  3. Prescription drug price reform: Medicare can now negotiate the price of certain prescription drugs, bringing down the price beneficiaries will pay for their medications.
  4. IRS tax enforcement: $80 billion will be invested in the nationโ€™s tax agency over the next 10 years.
  5. Affordable Care Act (ACA) subsidy extension: Currently, medical insurance premiums under the ACA are subsidized by the federal government to lower premiums. These subsidies, which were scheduled to expire at the end of this year, will be extended through 2025.
  6. Energy security and climate change investments: The bill includes numerous investments in climate protection: tax credits for households to offset energy costs, investments in clean energy production; and tax credits aimed at reducing carbon emissions.
    ๐๐จ๐š๐ญ๐ง๐ž๐ซ & ๐๐ฎ๐ ๐ก ๐“๐ก๐จ๐ฎ๐ ๐ก๐ญ๐ฌ:
  7. Creation of a 15% corporate minimum tax rate:
    Targeted at big businesses and big corporations โ€“ Taxes on individuals and households wonโ€™t be increased. Increased corporate taxes could have the opposite impact on inflation and quite possibly create higher prices.
  8. Stock buybacks:
    Stock buybacks by corporations will face a 1% excise tax.
    Another shot at big businesses BUT this could affect your personal investment accounts and possibly even create a tax inside your IRA or retirement accounts.
  9. Prescription drug price reform:
    Medicare recipients will have a $2,000 cap on annual out-of-pocket prescription drug costs, starting in 2025 โ€“ not sure there will be much impact of this provision for a couple of years.
  10. IRS tax enforcement:
    The Reports say as many as 87,000 new IRS agents will be hired. With so many new hires, and with the required training, it could take years before these new agents impact tax enforcement. Although the intention of this investment in tax enforcement is geared toward high wealth taxpayers, look for the IRS to take the easier way of picking on middle class taxpayersโ€ฆโ€ฆโ€ฆSIDE NOTE โ€“ if you get a letter from the IRS that says you owe a balance, donโ€™t just write a check and send it in. Always consult your tax preparer or a tax professional and see if you really owe this balance. In the majority of cases, you owe a lesser amount or nothing at all.
  11. Affordable Care Act (ACA) subsidy extension:
    Approximately 3 million Americans could lose their health insurance if these subsidies werenโ€™t extended, according to the U.S. Department of Health and Human Services. Of course, we want everyone to have access to health insurance, but this extension helps less than 1% of the US population retain health insurance.
  12. Energy security and climate change investments:
    An increase in the number of energy credits, but a very low limit on the amount of credit allowed. New credits for electric vehicles, but numerous restrictions and qualifications make these credits more of a marketing item than an obtainable/usable credit โ€“ at least in the short-term.
    ๐’๐ญ๐ฎ๐๐ข๐ž๐ฌ ๐’๐ก๐จ๐ฐ ๐๐ข๐ฅ๐ฅ ๐‹๐ข๐ค๐ž๐ฅ๐ฒ ๐‡๐š๐ฌ ๐๐จ ๐ˆ๐ฆ๐ฉ๐š๐œ๐ญ ๐จ๐ง ๐ˆ๐ง๐Ÿ๐ฅ๐š๐ญ๐ข๐จ๐งโ€”
    Many budgetary agencies and models including the Congressional Budget Office (CBO) believe the โ€œInflation Reduction Actโ€ will not likely reduce inflation or prices at all. The CBO states โ€œthe bill will barely make a dent on inflation in the near termโ€”and could even nudge it upward.โ€ While its name claims it will tame soaring inflation, estimates show that the bill will not likely do much to pull down the inflation rate. Even so, the bill remains a significant piece of legislation that accomplishes some initiatives that have been mired in congressional debate for decades.