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On Sunday, August 7, along strictly partisan lines, the Senate passed the Biden administration’s misnamed Inflation Reduction Act (IRA), with Vice President Kamala Harris casting the tiebreaking vote. The bill avoided a filibuster after the Senate parliamentarian held that the energy and drug provisions were budgetary matters that satisfied the reconciliation procedure under the Byrd Rule. Some strategic concessions won over the two Democrat holdouts, senators Joe Manchin of West Virginia and Kyrsten Sinema of Arizona. As matters now stand, the IRA cobbles together a number of disparate programs whose common thread is taxing a wide range of activities to supply handsome subsidies, largely for health care ($64 billion) and climate and renewable energy programs ($369 billion).
The overall legislation is notable for its relentless ad hoc–ery and last-minute amendments. On the taxation side, there is a 15 percent book minimum tax, that is, income that companies report to their investors, free of the odd quirks found in the Internal Revenue Code. The IRA now tinkers with the carried-interest exception by extending the long-term capital gain treatment waiting period from three to five years, but only for people whose adjusted gross income exceeds $400,000. In the IRA, there is also a stiff excise tax on drug manufacturers and drug companies with the temerity to refuse supplying the government with prescription drugs at bargain prices under Medicare Part D. And the ARA allocates $80 billion to increased IRS enforcement over the next ten years. In its most recent analysis, published on August 2, the Tax Foundation concluded that the bill is much ado about nothing, estimating that it will generate about $304 billion over the next ten years, with only tiny changes in both GDP growth wages of -0.1 percent, and a loss of some 30,000 jobs over that period. Following Senator Sinema’s changes, at least one Democratic official maintained the IRA would still generate close to $300 billion.