The Inflation Reduction Act of 2022
This week, the Senate debated their budget reconciliation bill, the Inflation Reduction Act) before leaving town for the August recess. Passage of the legislation requires only 50 votes, but a number of senators were out this week due to positive COVID-19 tests. Sen. Leahy (D-VT), who is recovering from hip surgery, voted. The Act would raise roughly $739 billion in tax revenue; approximately $433 billion of that revenue will be put toward new spending, with most of it going to energy and climate programs and some going to Affordable Care Act provisions. Just over $300 billion in revenue will be put toward deficit reduction.
The legislation includes the following: (Click here to view a summary.)
Fossil Fuels: The legislation could cost the oil industry $25 billion in new taxes as it would reinstate and increase a long-lapsed tax on crude and imported petroleum products to 16.4 cents per gallon.
Electric Car Credits: The bill includes $4,000 tax credits to purchase used electric vehicles, and up to $7,500 tax credit for new vehicles.
Renewable Energy Credits: The plan has $60 billion of incentives to bring clean energy manufacturing into the U.S. These include production tax credits to accelerate U.S. manufacturing of solar panels, wind turbines, batteries, and critical minerals processing. The plan also includes investment tax credits to build clean technology manufacturing plants that make EVs, turbines and other products. Additionally, there would be tax credits for consumers who add renewable energy items to their homes including efficient heat pumps, rooftop solar, electric HVAC and water heaters. The plan also includes $9 billion for home energy rebate programs for low-income consumers to make their homes more energy efficient and $1 billion in grants for affordable housing energy upgrades.
- The legislation includes over $60 billion to on-shore clean energy manufacturing in the U.S. across the full supply chain of clean energy and transportation technologies
- $10 billion investment tax credit to build clean technology manufacturing facilities, like facilities that make electric vehicles, wind turbines and solar panels
- $500 million in the Defense Production Act for heat pumps and critical minerals processing
- $2 billion in grants to retool existing auto manufacturing facilities to manufacture clean vehicles
- Up to $20 billion in loans to build new clean vehicle manufacturing facilities across the country
- Tax credits for clean sources of electricity and energy storage and roughly $30 billion in targeted grant and loan programs for states and electric utilities to accelerate the transition to clean electricity
Grants and tax credits to reduce emissions from industrial manufacturing processes, including almost $6 billion for a new Advanced Industrial Facilities Deployment Program to reduce emissions from chemical, steel and cement plants.