HORRY COUNTY, S.C. (WBTW) — The U.S. House is expected to approve the Inflation Reduction Act on Friday and send it to President Biden, who is expected to sign it into law.
The bill, approved by the Senate on Sunday, is expected to generate $739 billion over 10 years and result in more than $430 billion in spending.
A majority of that money, $369 billion, will go toward energy security and climate change, specifically supporting the manufacturing of wind turbines and solar panels, purchasing electric vehicles and providing funding for climate research.
The rest of the money will go toward extending Affordable Care Act subsidies through 2025.
Nearly half of the revenue, $313 billion, will be raised from a new 15% corporate tax applied to organizations with more than $1 billion in revenue. Large chunks of revenue will also come from allowing Medicare to negotiate the price of certain prescription drugs and strengthening the IRS.
Sourav Batabyal, assistant professor of finance and economics at Coastal Carolina University, said that while strengthening the IRS seems like an investment, it will make money in the long run.
“[The bill] has the provision for IRS tax enforcement,” Batabyal said. “Basically for the next decade, IRS enforcement activity includes that the IRS can hire more people and train more people so that they can collect more taxes.”
The big question is, will the bill actually reduce inflation?
The Congressional Budget Office said in a report that it will have “a negligible effect on inflation.” The report predicts only a 0.1% percentage point change in inflation by 2023 under the law.
Batabyal said it could potentially reduce inflation in the long run, but inflation may have to go come up even higher to go back down.
“It is true that you do not see any drastic effect in reducing inflation,” Batabyal said. “Initially, it might increase the inflation for the first year, and then eventually it’ll decrease the inflation.”