Build Back Manchin: Here’s what is included in the monster spending deal agreed to by Democrats

Senator Joe Manchin and Senate Majority Leader Chuck Schumer shocked Washington on Wednesday when they announced they had reached an agreement on a spending bill to lower the cost of prescription drugs and combat climate change.

The legislation is significantly pared down from Democrats’ proposed Build Back Better spending package – which would have included everything from child care; an expanded child tax credit; hearing and dental coverage coverage for Medicare; and home care for elderly people and people with disabilities. It’s a sign that Mr Manchin, the conservative Democrat from West Virginia’s, has some nervousness about increase spending and inflation.

Indeed, the legislation is dubbed the Inflation Reduction Act of 2022 as a reflection of how it will reduce prices in the next few years.

Similarly, it still faces an uphill battle. Senate Minority Leader Mitch McConnell told Reuters on Thursday that Republicans would oppose the legislation “as hard as we can”. Many aspects of the bill will need to be cleared with the Senate parliamentarian to see if it passes the rules to be included for budget reconciliation.

Budget reconciliation allows for legislation to pass with only 51 votes and avoid a filibuster as long as it’s related to spending and taxation. Democrats only have 50 Senators, meaning every one needs to be on board and Vice President Kamala Harris would serve as the tie-breaking vote.

Here’s what’s in the legislation – and a few things that are out.

Prescription drug pricing:

The legislation would allow for Medicare to negotiate drug prices starting in 2023. Medicare patients would have their out-of-pocket costs capped at $2,000 annually and would have the option to break that down into monthly payments. Drug companies would also be require to rebate the difference of a price increase to Medicare if companies raise prices higher than inflation. Vaccines would also become free for senior citizens, who are the only population for whom vaccines were not already free.

In the one-page summary, Democrats said they expect that the prescription drug part of the legislation would raise $288bn.

Increased IRS enforcement

Another important stream of revenue for the legislation comes from a pledge to increase money to allow the Internal Revenue Service to improve taxpayer compliance. Roughly $3.1bn will be spent on taxpayer services; $45bn will be spent on enforcement; $25bn on operations support; and $4,75bn on modernisation. A one-page summary said that “no use of the funds is intended to increase taxes on any taxpayer with taxable income below $400,000.”

Corporate minimum tax

Senators Ron Wyden, the chairman of the Finance Committee, and Elizabeth Warren have previously floated the idea of a corporate minimum tax to ensure that corporations don’t use loopholes to get away with paying below 15 per cent. The legislation from Mr Manchin and Mr Schumer would impose a 15 per cent minimum tax on corporations with a profit of at least $1bn. Democrats estimate the tax would raise $313bn in a decade.

Closing the carried interest loophole

Currently, partners at private investment funds are allowed to have their income taxed as capital gains, which has a rate lower than general income tax. Mr Manchin said in his statement that the US tax code “should focus more on closing unfair loopholes like carried interest”. Democrats estimate the amount will raise about $14bn in a decade. But it could cause hurdles since Senator Kyrsten Sinema of Arizona, a conservative Democrat, opposes closing the carried interest loophole, as Axios reported.

Climate change provisions

Democratic senators faced perhaps no greater obstacle with Mr Manchin, who hails from coal-heavy West Virginia, than dealing with climate change. A one-page summary from Mr Schumer estimated the legislation would reduce emissions by roughly 40 per cent in ten years and would spend $369bn in climate change mitigation and energy security in the same amount of time. At the same time, the legislation would reinstate lease sales for drilling in the Gulf of Mexico and in Alaska. At the same time, it would provide a $4,000 tax credit for low-income families to buy used clean-energy vehicles; 10 years of tax credits to make homes run on clean energy; a $1bn grant program to make affordable housing more energy efficient; and $9bn to help low-income people to electrify home appliances and retrofit for energy efficiency.

Douglas Mateo

Douglas holds a position as a content writer at Neptune Pine. His academic qualifications in journalism and home science have offered her a wide base from which to line various topics. He has a proficiency in scripting articles related to the Health industry, including new findings, disease-related, or epidemic-related news. Apart from this, Douglas writes an independent blog and assists people in living healthy life.