Sen. Joe Manchin (D-WV) this week announced his support for a bill to be known as the Inflation Reduction Act of 2022, a slimmed down version of Democrats’ Build Back Better legislation.
The bill includes $430 billion in new spending on renewable energy programs, electric vehicle and biofuel credits, health insurance subsidy extensions combined with a corporate tax minimum – among other revenue measures – that are expected to raise approximately $739 billion.
Specifically, the bill would raise the corporate minimum tax to 15 percent for companies with annual revenue over $1 billion and would increase IRS tax enforcement, which is expected to raise $80 billion over a decade. The bill would also end the carried interest provisions in the current tax code. It does not include an expansion of the State and Local Taxes (SALT) deduction, which House and Senate members from high-tax states have supported including in past Build Back Better negotiations as well as the 2017 Tax Cuts and Jobs Act.
“Tell me why a corporation that’s $1 billion in book value – that means the largest corporations in America – aren’t paying a minimum 15 percent taxes,” Manchin said of the bill’s text to a West Virginia radio host.
On the spending side, the bill includes $7,500 rebates for new electric vehicles and $4,500 tax credits for used ones, consumer home energy rebate programs, consumer tax credits for home efficiency technology, investment tax credits to build electric vehicles, wind turbines, and solar panel manufacturing facilities, grants to restructure auto manufacturing plants to produce electric vehicles, a methane emissions reduction program with an escalating fee per metric ton of methane emitted beginning in 2025, “environmental and climate justice block grants,” grants to reduce air pollution at ports, grants for the purchases of electric heavy duty vehicles used by schools, grants for forest conservation and urban tree planting, tax credits and grants to support the domestic production of biofuels, grants to build biofuel infrastructure, grants for coastal habitats, grants and tax credits to reduce emissions from industrial manufacturing, extensions to Affordable Care Act subsidies, provisions to allow Medicare to negotiate prescription drug prices, funding for the administration to invoke the Defense Production Act to produce heat pumps and mine and process critical minerals, reinstating an offshore oil and gas lease sale of 80 million acres of the Gulf of Mexico that was vacated by a federal judge due to an environmental review, raising royalty rates companies pay the government for onshore and offshore drilling on federal land, a window in which a lease for offshore wind development cannot be issued unless an oil and gas lease sale has also been held in the prior year, withdrawing the Trump administration’s moratorium on offshore wind leasing in the southeastern U.S. and the eastern Gulf of Mexico, and a “clean energy technology accelerator” to support the development of emission-reduction technologies.
Senate Democrats are expected to use the budget reconciliation process to pass the bill, which bypasses the 60-vote threshold to avoid a filibuster and only requires 50 votes for passage, assuming all components of the bill are budget-related. Senate Majority Leader Chuck Schumer (D-NY) shared the 725-page bill with the Senate parliamentarian on Wednesday for review to determine whether all parts of the bill qualify for the reconciliation process under Senate rules. He also said the Senate plans to vote on the bill next week.
The Senate is scheduled to go into recess after the first week of August and return after Labor Day, but that could change depending on the floor time needed to consider the bill. Several Senate Democrats are currently in isolation after testing positive for COVID-19, complicating the conference’s passage of the bill.
One additional complicating factor is the approval of Sen. Kyrsten Sinema (D-AZ), who is on record opposing some of the tax provisions in the bill from past negotiations. She has not indicated her support for this bill yet. Democrats need all 50 members of their conference for passage.
If passed by the Senate, the bill would still need to be passed by the House on a simple majority before going to the president for his signature.
