Inflation is the number one topic in the world, and central banks with governments play an essential role in taming it down. That is why the Biden administration signed the Inflation Reduction Act on Tuesday, 16th of August.
Inflation Reduction Act explained
Reportedly, this piece of legislation will have a significant impact on the economy immediately and in the long run. After the economy turned downwards, the White House promised there would come a solution, which is this bill. It is supposed to improve the lives of Americans immediately. But there is more to it than just general talks, let’s get more specific.
Tax credits for house upgrades connected to energies
A new 30% tax credit will be applied for installing heat pumps, energy-efficient windows, or newer appliance models. The second tax credit will incentivize people to get solar panels on their roofs. In addition, there will be $14,000 rebates that citizens can apply for when getting heat pumps or other energy-efficient home appliances. These new models will reportedly help save Americans thousands of dollars on energy bills.
Health care provisions
There is a plan to cap insulin payments for Medicare Part D enrollees at $35 per month beginning in 2023. Afterward, it will set a maximum for all out-of-pocket prescription expenses at around $4,000 per year in 2024 and then cut it to $2,000 in 2025. Reportedly, it will benefit about 1.4 million people every year.
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A subsidy for certain Americans’ health insurance prices was included in the 2010 Affordable Care Act, but it was set to expire this fall. Instead, they will now receive a three-year extension worth around $64 billion. There are approximately 13 million Americans who will benefit from this bill.
EV tax credits
Expanded tax credits for electric vehicles are another element of the IRA’s environmental impact. For brand-new electric cars, the credits are worth up to $7,500, and for pre-owned electric vehicles, they are worth up to $4,000. Moreover, you may be eligible for a tax credit if you install an electric vehicle charging station in your home.
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Although the IRA broadens the tax credit’s eligibility in certain areas, it also has some stringent criteria, such as requiring that battery components be made in the United States. As a result, some people in the industry are concerned that many automobiles that currently qualify for the credit will no longer be included.
Changes in oil drilling
Drilling regulations that conventional energy producers support will take effect immediately, even though it’s possible that Biden and his administration will not promote these energy-saving measures to their Democratic base. These clauses might increase oil production, allow drilling in new places, and encourage “carbon capture” technologies.
Will this act bring inflation down?
In contrast to what Biden claimed, early analysis indicates that the Inflation Reduction Act will most likely not result in any price decreases. The Penn Wharton Budget Model (PWBM) suggests that there is little likelihood that the legislation will have any effect on inflation, and even if yes, it will take years.