WASHINGTON, DC – The Concord Coalition today welcomed the deficit reduction goals of the Democratic Climate, Tax and Health Care bill, but cautioned that the heavily back-loaded nature of the savings poses a significant risk that some of those savings will never take effect. The “Inflation Reduction Act (IRA, H.R.5376),” which the Congressional Budget Office (CBO) projects will reduce federal budget deficits by up to $300 Billion over the coming 10 years, won passage today in the U.S. Senate and now moves onto the House for consideration.
“There is much to like about the IRA. The prescription drug pricing reforms will help slow the rate of growth in Medicare, the energy provisions are an essential down-payment in combating climate change, and the revenue-raisers will help reduce future budget deficits,” said Robert L. Bixby, Executive Director of the Concord Coalition, “but the back-loaded nature of the savings is concerning.”
According to a preliminary estimate provided by the Congressional Budget Office, the IRA would save approximately $740 billion over the next decade (when nonscorable savings from enhanced IRS enforcement are included) and spend nearly $435 billion, reducing future deficits by $305 billion. But two-thirds of those savings don’t materialize until the last half of the budget window.
“Savings from the IRA heavily rely on future revenue increases, including roughly $300 billion from a 15 percent minimum “book” tax on corporations, which will be a challenge to implement. As happened with the ill-fated ‘Cadillac tax’ in the Affordable Care Act, there is a clear danger that this new minimum corporate tax will be repeatedly delayed and eventually repealed without raising a nickel to offset the cost of the IRA’s new spending,” said Bixby.
In addition to back-loaded savings, the bill would extend the enhanced Affordable Care Act (ACA) premium tax subsidies for just three years rather than make them permanent—a well-worn budget gimmick often used to hide the true cost of legislation.
“It’s clear Congress has no intention of letting the expanded ACA premiums expire,” said Bixby. “Lawmakers shouldn’t force Americans to play healthcare roulette every few years. If the intent is to make the expanded premium subsidies permanent, Congress should find a way to offset that cost.”
Since the CBO published its preliminary estimate of the IRA, Senate Democrats announced several changes to the legislation: the carried interest tax provision was dropped; the 15% minimum book tax was altered to protect accelerated depreciation and wireless spectrum purchases; a new 1% fee on corporate stock buy-backs was added; and a $35 monthly cap on insulin for Medicare recipients was attached. In addition, Senate Democrats were forced to drop a key revenue raiser: penalties on pharmaceutical companies who raise private-sector drug prices faster than inflation. CBO has not yet issued a revised score that reflects these changes. When it does, The Concord Coalition will provide additional comment.