By KEVIN BESSLER
THE CENTER SQUARE
(The Center Square) – The Inflation Reduction Act is now law, but the effects on the economy and energy sector will be talked about for years.
The $740 billion package was signed into law Tuesday by President Joe Biden. While experts believe it won’t meaningfully reduce inflation, the law will send hundreds of billions of dollars towards fighting climate change, reducing prescription drug prices, and cutting the deficit.
One hotly debated aspect of the package is the effect on taxes.
According to the nonpartisan Congressional Budget Office, the bill will end up forcing working-class Americans to pay billions of dollars in new taxes. An analysis by the CBO estimates those earning less than $400,000 will pay an estimated $20 billion more in taxes over the next decade.
“I’m deeply disappointed in our Democratic Illinois representation in Washington who voted to raise taxes on the middle class during an extreme inflation crisis,” said Regan Deering, Republican candidate for Illinois’ newly formed 13th Congressional District. “Illinois families need help – not higher taxes.”
Her opponent, Democrat Nikki Budzinski, disputes the claim.
“So I think there is a lot of misinformation,” Ms. Budzinski told The Center Square. “There absolutely no tax increases for people making under $400,000. That is a misnomer.”
The White House has dismissed claims the bill will hurt lower and middle-income families, instead noting estimates have not taken into account how much the bill will offset costs for average Americans like prescription drugs.
The chief economist for the American Legislative Exchange Council is calling the Inflation Reduction Act “economic malpractice.”
“Unfortunately, the latest big government spending bill out of Washington will do little to help American families and small businesses in desperate need of relief from crippling inflation and unaffordable energy costs,” said Jonathan Williams. “To unleash an American recovery, we need to pivot away from the wasteful, big government spending agenda, and instead, focus on providing tax relief, right sized spending reforms and an elimination of burdensome government regulations.”
The legislation includes tax credits for electric vehicles and energy-efficient home improvements.
Mr. Deering says the transition to clean energy must not move too quickly.
“Balance is the key word there,” Mr. Deering told The Center Square. “We just can’t go full stop and keep moving the goal posts to renewable energy. We’ve got to find a way to keep things running smoothly and affordably for our farmers.”
Ms. Budzinski urged for energy diversification.
“We need investments in creating more domestic energy production,” Ms. Budzinski said. “We need to create our own energy independence. I think that’s an all of the above strategy.”
Included in the package are $75-hundred dollar tax credits for new electric vehicles and $4,000 for used EVs. There are strict requirements including a mandate that battery components come from the U.S., which has led some in the industry to worry that many vehicles that currently get the credit will now be left out.