(FOX 9) - Congressional Democrats sent their sweeping package of climate initiatives, prescription drug price caps, and corporate tax increases to President Joe Biden's desk Friday, just weeks after the bill appeared left for dead.
The $740 billion legislation passed on a 220-207 party-line vote. All four Minnesota Democrats voted for it, while all four Republicans voted against. It is a much smaller piece of legislation than Democrats first envisioned, but the party had to carve up the bill to get it through a narrowly controlled Congress.
The bill includes $375 billion to incentivize consumers to shift to alternative energy products. It extends a $7,500 tax credit for electric vehicles and offers additional credits for homeowners who install solar panels and energy-efficient systems.
For the first time, it requires the federal government to negotiate prices of top-selling pharmaceutical drugs for Medicare. The legislation caps monthly co-pays for insulin at $35 for Medicare recipients. It forces drug makers to pay rebates if they increase the price of drugs faster than the rate of inflation.
"This legislation will make a real difference in reducing costs for working families," said U.S. Rep. Angie Craig, a Democrat who represents Minnesota's second congressional district.
Democrats pay for their climate initiatives through two tax increases on businesses. This week, U.S. Rep. Tom Emmer of Minnesota referred to the tax hikes as a "shell game" that will hurt working people.
"The average American doesn’t need a college education, doesn’t need a PhD or a masters to understand you’re talking about taxing a corporation which will pass that right on to you, the consumer," Emmer said on a University of Minnesota forum. "Everybody [making] over $30,000, $30,000 and over, is going to pay more taxes because of what they’re doing."
The bill does not raise individual income taxes - on anyone making $30,000 or otherwise. But the tax increases on business could indirectly affect workers or investors if a corporation's earnings after taxes decline.
The legislation imposes a 15% minimum tax on companies that have annual incomes of at least $1 billion. The U.S. corporate tax rate is 21%, but companies are currently able to pay a lower effective tax rate because of offsets, such as those for capital investments.
The second change is a new 1% tax on stock buybacks. Share repurchases hit a record $881 billion last year, led by Apple, Meta and Alphabet. Companies use buybacks to increase their stock prices and give tax flexibility to shareholders.
Roger Conlon, a senior lecturer of accounting at the University of Minnesota Carlson School of Management who spent 26 years as a tax partner at Deloitte Tax LLP, said many companies will be unaffected by the changes.
"We’re really looking at the companies we read about every day in The Wall Street Journal," he said.
Many chief executives will be more concerned with the impact of rising interest rates, supply chain constraints, and worker shortages than with these tax changes, Conlon said.
"I don’t think it’s going to have a major impact on decision-making as far as a corporation," he said. "Nor do I think it’s going to have a significant impact on consumers or investors."
Republicans have also criticized another provision of the bill that gives $80 billion to the Internal Revenue Service.
The GOP has speculated that the agency will hire tens of thousands of collection agents to hunt down middle-income people, something IRS officials deny.
IRS officials and Democrats say the funding will help an agency that's been hollowed out by attrition force high-money tax dodgers into compliance while upgrading its technology.