It is likely no surprise that inflation has hit an all-time high this year in the United States. What is inflation, you may ask? It is a measure of how quickly the prices of goods and services are rising over time. Americans from all walks of life have had to deal with these price increases, which is not ideal for anyone because it damages the economy. People are finding it difficult to afford necessities like food, housing, and healthcare. As a result, President Biden signed the Inflation Reduction Act of 2022 in an attempt to combat this record-breaking level of inflation. This act may or may not be effective, but today, we will look at the details of it to inform you how it might help you.
What does the Inflation Reduction Act do?
As its name implies, the Inflation Reduction Act seeks to reduce the current rate of inflation. It attempts to achieve this by providing incentives for businesses and organizations to increase their productivity, while also encouraging cost-cutting measures.
Additionally, it sets limits on how high prices can increase. There are many temporary solutions, but here are some of the strategies the Biden Administration is implementing:
Health Care
The Inflation Reduction Act combats the amount Americans pay for healthcare. According to the White House, Americans pay two to three times more than what citizens in other countries pay for prescription drugs. The Inflation Reduction Act seeks to lower the cost of these drugs.
By 2023, the cost of insulin for seniors with diabetes who have Medicare will be limited to $34 per month. The cost of insulin in the United States is frequently several times more expensive than in other parts of the globe, thus this alteration will have a significant impact on individuals in America who suffer from diabetes.
Another way the cost of healthcare is being reduced is by making health insurance accessible to more Americans than before. All healthcare providers will be required to adhere to federal guidelines for pricing, helping to ensure that healthcare costs remain consistent and fair.
The Inflation Reduction Act would also create incentives for providers to reduce costs, such as tax credits for facilities that meet the criteria. The White House says 13 million Americans will save $800 a year on health insurance and 3 million more people will have health insurance.
Clean Energy
To tackle the issue of inflation, the Biden administration has taken a two-pronged approach by ramping up the adoption of clean energy. One way this is done is by giving families more opportunities to switch to clean energy and save more as a result. Here are some ways the White House states families will benefit from the lower clean energy costs in this act:
Families can save over $1,000 per year on taxes by taking advantage of clean energy/electric vehicle tax credits.
There will be $14,000 in consumer rebates in order for families to buy heat pumps and other energy efficient appliances for their homes. This will save families at least $350 per year.
About 7.5 million more families will have the option to install solar panels on their roofs with a 30% tax credit. This will ultimately save families $9,000 over the lifetime of the system or at least $300 per year.
Families can receive up to $7,500 in tax credits for new electric vehicles or $4,000 in tax credits for used electric vehicles. This is estimated to save them about $950 dollars per year.
By making clean energy more accessible, the Biden administration hopes to reach their climate change goals much quicker. The usage of more clean energy sources is projected to result in savings worth billions of dollars by avoiding damages that may have been triggered by climate change. This will also create millions of new jobs for Americans, which would further benefit the economy.
Taxes
Last but not least, the Inflation Reduction Act seeks to combat inflation by making tax code fairer for most Americans. The White House states that currently, many large corporations pay $0 in federal income tax. It's stated that only in 2020, as many as 55 of the most affluent corporations in the United States managed to dodge federal income taxes completely. It is also believed that the top 1% of earners are estimated to evade about $160 billion in taxes each year.
These are all things the Inflation Reduction Act plan to work against. The White House says the act will generate $124 billion in savings by collecting what is already owed by wealthy people and large corporations. It is also made clear that Americans that make less than $400,000 won’t see any increase in their taxes.
When will the economy notice a difference?
After learning about the details of the Inflation Reduction Act, you may be wondering when these changes will start to take effect. It may also be difficult to understand how exactly these changes directly target inflation, as some of them may seem unrelated. Some changes listed will take place within the next year, but some will take some more time. Inflation can be a difficult thing to defeat, and there isn’t really an overnight solution. As time goes on, it will be easier to notice that inflation is more manageable as we save in other ways. With the proper knowledge and effective administration, we can assure that our economy will be steadfast and prosperous.