inflation reduction act of 2022?

You may have seen in the news there is new legislation that may be passing soon in Washington DC called "Inflation Reduction Act of 2022".  The House has already passed the bill (when it was called the Build Back Better Act) and it is close to being passed in the Senate.  If it gets passed in the Senate, the President will sign it into law.

You can find the full text of the bill here, and below is a brief summary (link to Source).

The bill would raise revenue from:
- Imposing a 15% corporate minimum tax rate for companies with higher than $1 billion annual revenue – $313 billion
- Prescription drug price reform to lower prices, including Medicare negotiation of drug prices – $288 billion
- Increased tax enforcement – $124 billion
- Imposing a 1% excise tax on stock buybacks - $73 billion

It would spend this revenue on:
- Continuing for three more years the expansion of Affordable Care Act subsidies originally expanded under the American Rescue Plan Act of 2021 – $64 billion
- Addressing domestic energy security and climate change – $369 billion
- Funding for drought relief - $5 billion
- Deficit reduction – $306 billion

---

Impacts to Medicare Beneficiaries
There are two main impacts to Medicare Beneficiaries in the bill.

1. Addition of Hearing Coverage and Hearing Aid Coverage  (Updated August 8, 2022-  Unfortunately, this benefit was removed in the final bill.)
   
2. Creation of $2,000 Maximum out of Pocket for Part D Drug Costs starting in 2025 - this looks like a positive change for Medicare beneficiaries.  In the current system, there is technically unlimited exposure for Part D Prescription Drug costs, because there is no Maximum out of Pocket limit.  In the proposed bill, there will be a cap of $2,000 (in 2025, then ironically inflation-adjusted periodically) on Part D Prescription Drug Costs.  For those beneficiaries, with very expensive medication, this will bring some relief starting in 2025.  We shall see what the impact will be to the Part D Premium costs based on this change.

My concerns with the Bill are below.

• The two main projected revenue sources will likely never meet the $600 Billion revenue projected in the bill.  However, the $400 Billion in projected spending will certainly happen which will likely continue to increase inflation, not reduce inflation.  Ironic.
• Why am I so pessimistic about the $600 Billion in projected tax revenue?
  • $313 Billion projected from 15% minimum corporate tax rate - these large corporations have entire teams of internal and external accountants that find creative solutions (e.g. moving businesses to other countries) to reduce their tax rates.  The idea that $313 Billion in incremental tax revenue is going to be generated from this new rule just seems overzealous.
  • $288 Billion projected from Prescription Drug Price reform and Medicare negotiation of drug prices.  I am actually supportive of fixing Prescription Drug Pricing in this country.  I think drug pricing is out of control and makes no logical sense in a lot of cases (e.g. expensive drugs that treat chronic conditions and have been around for many years.). The largest lobbying group in Washington DC (by far) is the Pharmaceutical industry ($300 Million+ per year) and they seem to continue to find ways to maintain the current system which provides huge profits for Pharmaceutical companies.  

I really hope my pessimism is incorrect.  If the bill does get passed, I hope these changes work and generate the additional $600 Billion in Tax revenue (plus the other $200 Billion projected).  Otherwise, the additional spending in this bill will continue to drive increased Inflation for many years to come.