For decades, Americans have struggled to pay for basic household expenses while tax loopholes have allowed large corporations and the rich to get away with paying lower payroll taxes as a share of their income. At a time when many people doubted the government’s ability to solve problems, Congress passed the Inflation Reduction Act—an answer to some of the biggest challenges facing the nation and a key step toward creating a more resilient, inclusive economy.
But how does the law work and how will it affect Americans’ bank accounts? Here are the answers to four frequently asked questions about the Inflation Reduction Act.
1. Why is inflation rising in the United States and around the world?
Although federal legislation helped to restore employment and household income following the COVID-19 recession, inflationary pressures also surfaced. The United States, much like the rest of the world, is currently experiencing high inflation caused by the failure of supply to keep up with demand. Inflation today is due to a range of factors—primarily, ongoing COVID-19 supply disruptions and Russia’s war in Ukraine.
2. How will the Inflation Reduction Act lower inflation?
The Inflation Reduction Act will fight inflation by cracking down on wealthy tax cheats, which can help decrease demand, and by increasing domestic supply through investments in manufacturing and clean energy. It will also push down the cost of key non-negotiable expenses such as prescription drugs, health care, and energy—expenses that were already high before current inflationary pressures.
3. Why is the Inflation Reduction Act a big deal?
The Inflation Reduction Act not only works to fight inflation and lower costs for families but will also create an estimated 1.5 million good new jobs and help Americans afford new climate-friendly appliances and lifesaving medications, so they can breathe a little easier. For these reasons, the Inflation Reduction Act is the most consequential health care law in more than a decade, the most significant economic legislation in a generation, and the most impactful climate change bill ever.
4. How is the Inflation Reduction Act paid for?
The Inflation Reduction Act will be fully funded by closing tax loopholes exploited by large corporations, cracking down on wealthy people who cheat on their taxes, and lowering prescription drug costs.
As the Inflation Reduction Act is rolled out over the upcoming months, it will transform America. Soon, household costs that were once too expensive for many will be more affordable. With lower prescription drug, energy, and health care costs, families can save thousands of dollars. At the same time, clean energy, energy-efficient appliances, and electric vehicles will be more attainable. And over the next decade, millions of high-quality jobs will be created as today’s investments in fighting climate change create a better America.
It’s true: The Inflation Reduction Act will change lives for decades to come.