The Inflation Reduction Act of 2022 (IRA), Public Law 117-169, is a United States federal budget reconciliation law signed by President Joe Biden on 16 August 2022. The law aimed to reduce the federal government budget deficit, lower prescription drug prices, and invest in domestic energy production while promoting renewable energy. It was sponsored by Senators Chuck Schumer (D-NY) and Joe Manchin (D-WV), and all voting Democrats supported the bill while all voting Republicans opposed it. Estimates of the law's total spending and its likely economic and emissions effects vary across forecasting institutions; see inflation-reduction-act-economic-impact-debate.
The Congressional Budget Office estimated that the act would reduce federal budget deficits by $237 billion over ten years through a combination of revenue increases-including a 15% corporate minimum tax, a 1% excise tax on stock buybacks, and increased IRS enforcement funding-and savings from prescription drug pricing reform.1) Independent analyses of the act's total climate and energy spending differ substantially, with estimates ranging from roughly $663 billion to $1.2 trillion depending on methodology and assumptions about credit utilization.2)
The law's three principal areas of substantive change are energy and climate policy, healthcare and prescription drug pricing, and tax administration. On energy, the act extends and restructures tax credits for renewable electricity generation, electric vehicles, and energy efficiency, and creates a $27 billion Greenhouse Gas Reduction Fund.3) On healthcare, the law allows Medicare to negotiate prices for certain prescription drugs for the first time, caps Medicare beneficiaries' insulin costs at $35 per month, and extends expanded Affordable Care Act marketplace subsidies originally enacted under the American Rescue Plan Act of 2021.4) On tax administration, the act appropriates approximately $80 billion in additional funding to the Internal Revenue Service over ten years for enforcement, operations, and taxpayer service improvements.5)
The act's name and its likely effect on consumer price inflation have themselves been subjects of dispute since passage; see inflation-reduction-act-name-controversy and inflation-reduction-act-economic-impact-debate. Background on the bill's legislative origins, including its relationship to the earlier Build Back Better Act proposal, is covered at inflation-reduction-act-history.