What's in the Inflation Reduction Act, Democrats' health care, climate and tax bill?

Washington — More than a year after President Biden unveiled his sweeping domestic spending plan, the Senate on Sunday approved a more narrow $740 billion package that aims to tackle health care costs, tax large corporations and make historic investments in combating climate change.

The plan, called the Inflation Reduction Act, passed the upper chamber along party lines, with Vice President Kamala Harris casting the tie-breaking vote. Democrats used a legislative process called budget reconciliation to pass the measure amid unanimous opposition from Republicans.

The House is set to briefly return to Washington from its summer recess Friday to take up the package, and is expected to send the bill to Mr. Biden's desk for his signature.

Approval of the legislation by the 50-50 Senate capped a months-long fight over the president's domestic policy priorities, with negotiations coming in fits and starts as Sen. Joe Manchin, a moderate Democrat from West Virginia, expressed concerns about new federal spending amid rising consumer prices.

But a breakthrough emerged late last month with a surprise agreement from Manchin and Senate Majority Leader Chuck Schumer, with Democrats now poised to notch a key win as they fight to maintain their hold on Congress in November's midterm elections.

Here is what's in the new health care, tax and energy package:

Climate and energy

On Sunday, Schumer heralded the plan as the "boldest climate package in U.S. history."

"This bill will kickstart the era of affordable clean energy in America," he said in remarks on the Senate floor. "It's a game-changer, it's a turning point, and it's been a long time in coming."

The legislation invests nearly $400 billion in energy security and climate change proposals and would help reduce carbon emissions by approximately 40% by 2030, Democrats said in a summary of the provisions.

To incentivize consumers to purchase technologies to lower emissions and energy prices, the bill includes $9 billion in consumer home energy rebate programs, a $4,000 consumer tax credit to purchase used electric vehicles and a $7,500 tax credit to buy new clean vehicles, both of which are available only to lower and middle income individuals. 

The bill's energy section invests $30 billion in production tax credits to speed U.S. production of solar panels, wind turbines, batters and critical minerals processing; $10 billion in tax credits to build clean technology manufacturing facilities, such as those that make electric vehicles and and solar panels; and $500 million through the Defense Production Act for heat pumps and critical minerals processing.

For rural communities, the plan invests more than $20 billion for "climate-smart agriculture practices," grants for fire-resilient forests, forest conservation and urban tree planting, and $2.6 billion in grants for conservation and restoration of coastal habitats.

It also imposes a charge of up to $1,500 per metric ton on oil and gas companies for methane emissions, and reinstates oil and gas lease sales in the Gulf of Mexico and Alaska.

Tax revenue

Democrats' tax revenue proposal has two components: a 15% corporate minimum tax imposed on most corporations that make more than $1 billion each year, and nearly $80 billion for stricter tax enforcement and compliance by the Internal Revenue Service.

The enhancement of tax enforcement resources will bring in an additional $204 billion in revenue over a decade, according to the Congressional Budget Office.

Democrats' package will reduce federal budget deficits by $102 billion over 10 years, the agency found, an estimate that did not factor in the new revenue from beefed-up IRS enforcement.

The corporate tax provision was a point of contention as senators neared a final vote on Sunday. Seven Democrats joined all Republicans to approve an amendment put forward by GOP Sen. John Thune of South Dakota that exempts some firms with private equity backing from the 15% minimum corporate tax rate. 

Health care

The new legislation includes a policy that allows Medicare to negotiate for the price of prescription drugs starting in 2023, a top Democratic priority that is expected to save hundreds of billions of dollars over the next 10 years. It also sets an annual cap of $2,000 on out-of-pocket costs for Medicare patients enrolled in drug plans.

For Medicare enrollees, the price of insulin is also capped at $35 per month. Democrats attempted to waive reconciliation rules and maintain a provision that would have capped the price of insulin at $35 a month for those covered under private health care plans, but Republicans blocked the proposal.

Under Democrats' proposal, enhanced Affordable Care Act subsidies would also be extended through 2025. The premium subsidies were included in the $1.9 trillion COVID-19 relief package enacted last year and were set to lapse at the end of the year.