Money Rehab with Nicole Lapin - Inflation Reduction Act and What it Means for You

Episode Date: August 11, 2022

This week, the U.S. Senate passed the Inflation Reduction Act. If you grew up on Schoolhouse Rock, you’ll know that next the bill goes to the U.S. House. Because the House is controlled by the Democrats, it is expected to pass at the end of this week. President Biden would then sign the bill into law, likely late this week or next week. So WTF is the Inflation Reduction Act— and more importantly, how will it affect you? Nicole explains.

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Well, it doesn't. Charge for wasting our time. I will take a check. Like an old school check. You recognize her from anchoring on CNN, CNBC, and Bloomberg. The only financial expert you don't need a dictionary to understand. Nicole Lappin. On Sunday, the U.S. Senate passed the Inflation Reduction Act.

It was a true nail-biter. The vote was 50-50, with Democrats for the act and Republicans against it. Vice President Kamala Harris cast the deciding vote, giving Democrats a 51-50 win. Now, if you grew up on Schoolhouse Rock like I did, sorry if a bill becomes a law gets in your head after this, you'll know that next the bill goes to the U.S. House. Because the House is controlled by Democrats right now, it is expected to pass at the end of the week.

President Biden would then sign the bill into law, the House is controlled by Democrats right now, it is expected to pass at the end of the week. President Biden would then sign the bill into law, likely late this week or next week. So WTF is the Inflation Reduction Act. And more importantly, how will it affect you? Well, that's a little bit TBD. There's a lot of arguing along party lines about the effect of the Inflation Reduction Act, including whether it will actually reduce inflation. Democrats say the bill will do six key things. Number one, make a historic down payment to the tune of $300 billion on deficit reduction to fight inflation. Number two, invest in domestic energy production and manufacturing. Number three, reduce carbon emissions by roughly 40 percent by 2030. Number

four, allow Medicare to negotiate for prescription drug prices. Number five, Medicare to negotiate for prescription drug prices. Number five, extend the Affordable Care Act through 2025. Number six, invest $369 billion in energy security and climate change programs during the next 10 years. According to Fox News, though, Republicans argue that the bill are going to do five other key things, which in most cases contradict Democrats predictions, including number one. The act will actually make inflation and prices worse. Number two, raise gas prices. Number three, raise taxes on families during a recession. Number four,

hurt small businesses and American manufacturing. Number five, send an army of tens of thousands of newly funded IRS agents out to harass law-abiding Americans. Of course, only time will tell which party's spin actually turns out to be the most accurate. For now, let's decode the parts of the act that are expected to make an impact on you. There are three major areas where you can expect changes. Healthcare, climate, and your relationship with the IRS. Let's start with healthcare. There are several elements of this act that will affect health care for Americans, perhaps most notably lowering health insurance premiums for millions of Affordable

Care Act enrollees. And there will also be a $2,000 a year cap on out-of-pocket drug costs for senior patients enrolled in Medicare. Now for the climate love. This act includes an extension of the $7,500 consumer income tax credit for the purchase of new electric vehicles and the addition of a new $4,000 credit for buying a used electric vehicle. And with these gas prices, electric vehicles have never looked so good. Plus, the bill also includes rebates or tax breaks for Americans who make their homes more energy efficient by adding heat pumps, rooftop solar panels, electric water heaters, and similar types of equipment. On a more macro level, though, this act also includes tax breaks to encourage the construction of renewable electricity plants, which in turn could lead to price

breaks for everyone who pays money to renewable companies. And lastly, this one is highly controversial. You may be affected by the IRS going into what the Wall Street Journal calls beast mode. This act gives the IRS billions more dollars to increase enforcement. How many billions? About six times the current annual IRS budget. That is expected to translate into more than 80,000 additional IRS agents. Are your palms sweating? Because mine are too. And I probably overpay in taxes because all of this stuff still scares me. And all of these new agents are now tasked to go out and

find more than $200 billion. If that number is anywhere close to right, the Wall Street Journal's editorial board wrote that it means IRS auditors will soon be coming after tens of millions of Americans. Unfortunately, of those tens of millions of Americans, not all of them will be the richest of the rich. The nonpartisan Joint Committee on Taxation says that between 78% and 90% of the cash that the IRS is expected to collect will come from small businesses making less than $200,000 annually. For today's tip, you can take straight to the bank. Ask your financial advisor how they would help you invest in businesses that are working on clean power generation. Given the scale of this bill's investment in that kind of technology,

there is expected to be a gold rush that will turbocharge those businesses. Money Rehab is a production of iHeartRadio. I'm your host, Nicole Lappin. Our producers are Morgan Lavoie and Mike Coscarelli. Executive producers are Nikki Etor and Will Pearson. Our mascots are Penny and Mimsy. Huge thanks to OG Money Rehab team,

Michelle Lanz for her development work, Catherine Law for her production and writing magic, and Brandon Dickert for his editing, engineering, and sound design. And as always, thanks to you for finally investing in yourself so that you can get it together and get it all.