By signing the Inflation Reduction Act, President Biden is making good on his promise to build an economy that works for working families and small businesses. The Inflation Reduction Act makes urgent investments to lower prescription drug costs, health care costs, and energy costs to create opportunities for America’s 33 million small businesses and innovative startups. It is the most aggressive action we have taken to tackle the climate crisis. It will help the Fed tackle inflation by reducing the deficit. The super rich and big corporations are required to pay their fair share, and no small business or family making under $400,000 a year will pay a penny more in taxes.
President Biden and Congressional Democrats overcame special interests to pass this landmark legislation to deliver for American families and small businesses and grow the economy from the bottom up and from the middle.
Lower costs for small businesses
The Inflation Reduction Act will reduce costs for small businesses by keeping health care costs lower, supporting energy conservation investments and strengthening supply chain resilience.
Maintaining critical support for health care costs for small businesses. The Inflation Reduction Act would maintain the American Rescue Plan’s premium tax credit support for Affordable Care Act (ACA) plans by extending them through 2025. According to a recent analysis of 2021 tax data issued by the Department of Health and Human Services, the ACA Marketplace serves as an important source of coverage for 2.6 million small business owners and self-employed adults. Additionally, small business owners and the self-employed make up 25 percent of Marketplace enrollment among working-age adults. Since the implementation of the ACA, the uninsured rate for the self-employed has dropped dramatically from 30% in 2013 to 20.5% in 2019, resulting in 1.3 million fewer uninsured self-employed adults. In general, about 13 million Americans will save an average of about $800 a year on their health insurance premiums compared to what they would have paid without the Inflation Reduction Act. This investment will continue to drive new business start-ups and job creation, as entrepreneurs can take the step of starting a business without the risk of being uninsured.
Lowering energy costs for small businesses. The Inflation Reduction Act includes a number of provisions that will save small business owners money on energy costs:
- Small businesses can get a tax credit that covers 30% of the cost of switching to low-cost solar power – reducing operating costs and protecting against the volatile energy prices that are currently squeezing small businesses.
- Small business building owners can receive a tax credit of up to $5 per square foot to support energy efficiency improvements that result in lower utility bills.
- Small businesses that use large vehicles such as trucks and vans will benefit from tax credits covering 30% of the purchase costs for clean commercial vehicles, such as electric and fuel cell models.
As small businesses save on energy costs, they will also help fight the climate crisis. The greater frequency and scale of natural disasters has put more small businesses and communities at risk of destruction and disruption. The Inflation Reduction Act’s historic action on climate change will provide stability and economic growth for Main Streets across the country.
Deficit reduction to fight inflation. The Inflation Reduction Act is more than fully paid for and will drive deficit reduction over the next decade. This will build on the significant debt reduction that has occurred under the Biden-Harris Administration. The administration is expected to achieve more than $1.5 trillion in deficit reduction this year, after cutting the deficit by more than $350 billion last year. This would be the largest single-year decline ever in our nation’s history and would leave the deficit lower than the Congressional Budget Office projected before the passage of the American Rescue Plan. And many economists and leading commentators have argued that, building on the deficit reduction we’ve achieved to date under President Biden with hundreds of billions in additional deficit reduction, the Inflation Reduction Act will help ease inflationary pressures. When small businesses operate with more price stability, from gas to wages, it will be easier for entrepreneurs to plan and grow their businesses.
Lower prescription drug costs for seniors. Many small businesses are owned by seniors. Americans pay 2-3 times more for their prescription drugs than people in other rich countries. High prices contribute to racial and ethnic health disparities. The Inflation Reduction Act will help close the medication access gap by improving prescription drug coverage and lowering Medicare drug prices. Law:
- Caps the amount seniors will have to pay for prescription drugs they buy at pharmacies at $2,000 a year.
- Caps the amount seniors will have to pay for insulin at $35 for a month’s supply.
- Provides access to a number of free additional vaccines, including the herpes vaccine, for Medicare beneficiaries.
- It would further lower prescription drug costs for seniors by allowing Medicare to negotiate the price of high-cost drugs and requiring drugmakers to pay Medicare a rebate when they raise prices faster than inflation.
Expanding economic opportunities for small businesses
The Inflation Reduction Act will help small businesses grow and create good-paying jobs in communities across America.
Doubling the Research and Development (R&D) tax credit for small businesses. Pre-revenue startups create jobs and support economic growth through research, discovery and innovation. However, they have not been able to benefit from the R&D tax credit to the same extent as large businesses. This bill levels the playing field and will help spur their high-impact R&D by increasing the refundable research and development tax credit for small businesses from $250,000 to $500,000. Starting in 2023, small businesses can use the credit to further reduce payroll taxes and certain other business expenses up to $500,000 a year so they can do what they do best: innovate and commercialize to solve global problems and create jobs to drive our economy forward. .
Increasing American manufacturing and competitiveness. The act opens up opportunities for small businesses and invests in American workers and industry by boosting U.S. supply chains through technologies like solar, wind, carbon capture and clean hydrogen, at a time when countries around the world are racing to lead the economy of clean energy. . The legislation includes targeted tax incentives aimed at manufacturing US-sourced materials such as batteries, solar and wind parts, and technologies such as carbon capture systems and electrolyzers to produce hydrogen. The legislation also includes key requirements around domestic sourcing – for example, on the use of domestic steel in wind projects – and around wages and prevailing practices to ensure we create good-paying jobs.
Supporting local clean energy economies: The act creates a new Clean Energy and Sustainability Accelerator, which will establish state and local clean energy financing institutions, supporting the deployment of distributed zero-emission technologies such as heat pumps, community solar and charging of EV. This Accelerator will expand opportunities for clean energy entrepreneurship by prioritizing over 50% of its investments in disadvantaged communities.
Expanding Rural Opportunities. The act significantly expands the Rural Energy for America Program, which supports small rural businesses and agricultural producers with clean energy and energy efficiency improvements. The USDA estimates that this expansion will reach more than 41,500 small businesses and farms. The act also provides more than $9 billion to help rural electric cooperatives, which serve more than 21 million businesses, homes and farms, increase resiliency, reliability and affordability, including through clean energy projects.
Leveling the playing field by reforming the Tax Code
The 2017 tax law of President Trump and congressional Republicans only made an unfair tax system worse. The Inflation Reduction Act of 2022 is a critical step forward in making our tax code fairer. It will increase revenue by:
- Making sure the ultra rich and big corporations pay the taxes they already owe.
- Hitting large, profitable corporations with more than $1 billion in annual profits that currently get away with paying little or no federal income tax.
- Imposing a 1% surcharge on corporate stock purchases that will encourage businesses to invest.
Small businesses and working families will have better access to the benefits they’re entitled to under the tax code and will be able to answer their questions quickly and efficiently, thanks to the Act’s transformative investments in the Internal Revenue Service Internal. Treasury Secretary Janet Yellen has ordered the Internal Revenue Service not to use any of the additional funds provided by the bill to increase the share of small businesses or households below the $400,000 threshold that are audited relative to historical levels. This will help ensure that no family or small business making less than $400,000 a year will see their taxes go up by a single cent.