Inflation Reduction Act Eases Financial Burdens, Tackles Climate Change

Photo courtesy of Pixabay

Despite the Inflation Reduction Act decreasing the cost of gas at the pumps, the inflation rate in the United States remains at 8.26%, compared to 8.52% the previous month and 5.25% last year (per Photo courtesy of Pixabay.

On August 16, President Joe Biden signed the Inflation Reduction Act (IRA). Introduced by Democratic senators Joe Manchin and Chuck Schumer, the act is considered one of the most aggressive climate investments ever taken by Congress. It also attempts to lower the price of oil and the cost healthcare and gas. It further seeks to close tax loopholes for large corporations. 

The climate package hopes to reduce greenhouse emissions by approximately 40% by 2030. 

Resources for the Future Research Analyst Nicholas Roy, Fellow Kevin Rennert, and Senior Fellow Dallas Burtraw estimate that the new legislation will lower consumer electric and gas bill prices. 

“The average household will experience approximately $170–$220 in annual savings from smaller electricity bills and reductions in the costs of goods and services,” they said. 

A recent Gallup Poll reports that 18 million Americans cannot afford their prescription drugs, an issue the IRA attempts to address by allowing Medicare to negotiate lower prices for high-cost prescription drugs for the first time. 

Families that benefit from Medicare or the Affordable Care Act may be eligible for further healthcare benefits, including not needing to pay more than $35 for a month’s supply of insulin. 

In addition to lowering the costs of essentials, the act combats climate change by promoting domestic production and American-made products through clean-energy practices, such as solar, wind, and clean hydrogen. 

Moravian students are hopeful that the IRA will move in the right direction in tackling the U.S.’ contribution to climate change. 

“We should have [passed the act] by now, but I’m glad it is in action now,” said nursing major Angel Velazquez ‘26. 

The act also establishes a minimum 15 percent tax on corporations that currently pay little to no federal income tax, in addition to imposing a 1 percent surcharge on corporate stock buy-backs. 

These additional taxes encourage businesses to invest in workers and the communities, instead of increasing CEOs’ wages or channeling tax-free profits to shareholders. 

The act further encourages additional investments into taxpayer services to assist Americans with tax and credit benefit questions they may have. 

Companies that do not pay prevailing wages may be penalized under this act, with the federal government promising that workers will receive their prevailing wages plus interest. 

The IRA is also investing $60 billion in creating new domestic clean manufacturing jobs, many of them union-led, in addition to investing $60 billion for environmental justice to clean up pollution in disadvantaged communities. 

The IRA promises that no taxpayer making less than $400,000 per year will pay additional taxes due to this package.

One of the essential goals of the IRA is to encourage more U.S. oil and natural gas development while fostering lower methane emissions. 

Despite the name, most of the act tackles the climate change crisis, providing $369 billion for climate and clean energy provisions. The IRA’s encouragement of domestic-based production hopes to prevent bottlenecked industries from raising consumer prices while also tackling climate change.