With unprecedented rates of inflation, higher than they’ve been in 40 years, Americans are left to watch helplessly on the sidelines as the prices of food, gas, rent, and other essentials climb far above what they’re truly worth. It’s no secret that the United States economy struggled in 2022. As a result, President Biden introduced the Inflation Reduction Act of 2022. This policy is intended to reduce extreme levels of inflation and return the economy to a stable place. Here, we’re outlining what the policy does and why it matters to you.
Tax Code Reforms
The Inflation Reduction Act of 2022 aims to make the tax code fairer for the average citizen. The White House explains the main actions of this policy: “It will raise revenue by ensuring that the ultra wealthy and large corporations pay the taxes they already owe; cracking down on large, profitable corporations with more than $1 billion in annual profits that currently get away with paying little to no federal income tax; imposing a 1% surcharge on corporate stock buybacks that will encourage businesses to invest.”
On top of these results, the tax code reforms also aim to keep small businesses and individuals making less than $400,000 per year from paying more taxes. These policy changes to the economy are intended to help keep money in the hand of low-medium class consumers, which will ideally create more demand for services and goods at a reasonable price instead of an inflated one.
Expanding the Economy for Small Businesses
Another goal of the Inflation Reduction Act of 2022 is to give small businesses a boost and create more jobs across the country. Ideally, these actions will lower the unemployment rate and continue to put more money in the hands of lower-income consumers.
Several actions have been taken in order to pursue these outcomes. The first is that the Research and Development (R&D) Tax Credit for Small Businesses has been doubled. The White House explains, “Pre-revenue startups create jobs and support economic growth through research, discovery, and innovation. However, they have not been able to take advantage of the R&D tax credit to the same extent as large businesses. This bill levels the playing field and will help spur their high-impact R&D, by increasing the refundable research and development tax credit for small businesses from $250,000 to $500,000.”
The Act also supports local clean energy economies. This effort will create more jobs and work to keep the environment clean. Additionally, “This Accelerator will expand opportunities for clean energy entrepreneurship while prioritizing over 50% of its investments in disadvantaged communities.”
Expanding rural opportunities is another goal of the Act. This goes hand-in-hand with the goal to boost American manufacturing and competitiveness by “spurring U.S. supply chains across technologies like solar, wind, carbon capture, and clean hydrogen, at a time when countries around the world are racing to lead the clean energy economy.” The legislation offers tax incentives for using U.S.-sourced products and mandates the use of domestically-sourced items in some instances.
Lowering Costs for Small Businesses
The Inflation Reduction Act will ensure that support for small business healthcare costs is kept in place through 2025. This serves both individuals and businesses, as receiving healthcare through the government allows many Americans to save hundreds of dollars each year. “Overall, about 13 million Americans will save an average of about $800 annually on their health insurance premiums compared to what they would pay without the Inflation Reduction Act. This investment will continue to spur new business starts and job creation, as entrepreneurs may take the leap of starting a business without the risk of going uninsured.”
Additionally, small businesses will receive financial incentives to switch to low-cost solar power; to make structural changes that allow for lower cost of utilities over time; and to use more fuel-efficient vehicles. The Act also lowers prescription drug costs for seniors and makes big moves to lower the overall deficit.
Each of these measures is intended to help lower these extreme inflation rates both quickly, for immediate relief, and over time, for a more stable economy. Whether or not you agree with these policies can help you determine whether to lend your support to the Inflation Reduction Act of 2022 and local policies that either support or move against it.