Health Care

‘Inflation Reduction Act’ cuts Medicare costs of prescription drugs, insurance premiums, Scott says

Tax watchdog group warns of steep cost increases elsewhere

an elderly couple having conversation at the living room
Seniors on Medicare may pay less for prescription drugs, including insulin. Photo on Pexels.com

By Guy Page

The recently-passed ‘Inflation Reduction Act’ will help many Vermonters pay for health care, a statement issued by Gov. Phil Scott declared yesterday. However, a tax watchdog organization warns of steep cost increases elsewhere.

Free adult vaccines, low-cost insulin, cap on Medicare drug costs

The Act will cap out-of-pocket drug prescription costs for Vermonters, the administration said. Starting in 2025, Vermonters who are on Medicare – including most of Vermont’s senior citizens over the age of 65 – will not pay more than $2,000 per year for prescription drugs. Beginning in 2023, they will not pay more than $35 per month for insulin, a medication used to treat diabetes.

In addition, Vermonters who are covered by Medicare or Medicaid can receive all recommended adult vaccines for free beginning next year.

Health premium subsidies

Young adults are traditionally the most likely to be uninsured, often due to their risk tolerance and insurance costs. The Vermont Household Health Insurance Survey estimates the number of uninsured Vermonters aged 25-34 fell 10% from fall of 2018 to fall of 2021, resulting, in part, from additional federal dollars reducing the cost of insurance for Vermonters. The Act extends these federal dollars to help eligible Vermonters pay for health insurance premiums through 2025.

Subsidies currently help about 23,550 Vermonters who purchase insurance through Vermont’s health insurance marketplace, Vermont Health Connect. Vermonters saved nearly triple the national average through premium assistance, according to a September 2021 report by the Center for Consumer Information and Insurance Oversight. Vermonters who enrolled in the first year that subsidies were available saw their premiums decrease by $186 per month, or 62%.

The Scott administration statement does not address other aspects about the bill, including taxes levied. 

HR 5376, ‘The Inflation Reduction Act of 2022,’ survived 43 roll calls – 39 in the Senate, 4 in the House. Vermont’s Congressional delegation (Sens. Leahy and Sanders, Rep. Welch) all supported it. 

The Penn Wharton Budget Model (PWBM) August 12 released updated estimates of the budgetary and macroeconomic effects of HR5376:

No Impact on Inflation

The model, an initiative of the University of Pennsylvania, found that Democrats’ “Inflation Reduction Act” would have “no meaningful effect on inflation in the near term.” Here it is straight from the report:

“The Act would have no meaningful effect on inflation in the near term but would reduce inflation by around 0.1 percentage points by the middle of the first decade. These point estimates, however, are not statistically different from zero, indicating a low level of confidence that the legislation would have any measurable impact on inflation.”

Tax Hikes Hit Households and Shareholder Returns, Lower Wages

“Though not responsible for remitting taxes assessed on business activity, households bear some of the economic burden of such taxes. Shareholders receive lower after-tax returns, and workers earn lower wages with fewer productivity-enhancing investments.”

The following analysis of the tax implications of the ‘Inflation Reduction Act’ was published August 12 by Americans for Tax Reform:

$6.5 Billion Natural Gas Tax Which Will Increase Household Energy Bills       

The bill imposes a regressive tax on American oil and gas development. The tax will drive up the cost of household energy bills. The Congressional Budget Office estimates the natural gas tax will increase taxes by roughly $6.5 billion.

The tax hike violates President Biden’s tax pledge to any American making less than $400,000 per year. Biden administration officials have repeatedly admitted taxes that raise consumer energy prices are in violation of President Biden’s $400,000 tax pledge.

A letter to Congress from the American Gas Association warned that the methane tax would amount to a 17% increase on an average family’s natural gas bill. Democrats have included a tax in the bill despite retail prices for energy surpassing multi-year highs in the United States.

$12 Billion Crude Oil Tax Which Will Increase Household Costs

With gas averaging more than $4.00  per gallon across the country and only weeks removed from record-high prices, Democrats have included a 16.4 cents-per-barrel tax on crude oil and imported petroleum products that will be passed on to consumers in the form of higher gas prices.

The tax hike violates President Biden’s tax pledge to any American making less than $400,000 per year.

As noted above, Biden administration officials have repeatedly admitted taxes that raise consumer energy prices are in violation of President Biden’s $400,000 tax pledge.

As if it weren’t bad enough, Democrats have pegged their oil tax increase to inflation. As inflation increases, so will the level of tax.

The non-partisan Joint Committee on Taxation (JCT) estimates the provision will raise $12 billion in taxes.

$1.2 Billion Coal Tax Which Will Increase Household Energy Bills

The bill would more than double current excise taxes on coal production. Under the Democrat proposal, the tax rate on coal from subsurface mining would increase from $0.50 per ton to $1.10 per ton while the tax rate on coal from surface mining would increase from $0.25 per ton to $0.55 per ton.

JCT estimates that this will raise $1.2 billion in taxes that will be passed on to consumers in the form of higher electricity bills.

$225 Billion Corporate Income Tax Hike Which Will Be Passed on to Households

Democrats imposed a 15 percent corporate alternative minimum tax on the financial statement income of American businesses reporting $1 billion in profits for the past three years. These American companies employ millions of Americans.

The cost of this tax increase will be borne by working families in the form of higher prices, fewer jobs, and lower wages.

A Tax Foundation report from last December found a 15 percent book tax would reduce GDP by 0.1 percent and kill 27,000 jobs.

Preliminary cost estimates from the Congressional Budget Office found the provision would increase taxes by more than $225 billion.

According to JCT’s analysis, 49.7 percent of the tax would be borne by the manufacturing industry at a time when manufacturers are already struggling with supply-chain disruptions.

Tax Foundation also warned that current supply chain issues could be worsened by the book tax’s disproportionate burden on key industries. The report concluded that “the coal industry faces the heaviest burden of the book minimum tax, facing a net tax hike of 7.2 percent of its pretax book income, followed by automobile and truck manufacturing, which faces a 5.1 percent tax hike.” 

$74 Billion Stock Tax Which Will Hit Nest Eggs — 401(k)s, IRAs and Pension Plans

When Americans choose to sell shares of stock back to a company, Democrats will impose a new federal excise tax which will reduce the value of household nest eggs. Raising taxes and restricting stock buybacks harms the retirement savings of any individual with a 401(k), IRA or pension plan.

Union retirement plans will also be hit.

The tax will put U.S. employers at a competitive disadvantage with China, which does not have such a tax.

Stock buybacks help grow retirement accounts. Raising taxes and restricting buybacks would harm the 58 percent of Americans who own stock and more than 60 million workers invested in a 401(k). An additional 14.83 million Americans are invested in 529 education savings accounts.

Retirement accounts hold the largest share of corporate stocks, accounting for roughly 37 percent of the outstanding $22.8 trillion in U.S. corporate stock, according to the Tax Foundation.

In 2017, corporate-sponsored funds made up $4.45 trillion in market value; union-sponsored funds accounted for $409 billion; and public-sponsored funds, which benefit teachers and police officers, added up to $4.25 trillion.

When companies perform stock buybacks, these investors are the ones who benefit. A tax on buybacks could dissuade companies from conducting this action and negatively impact retirement savings.

95% Federal Excise Tax on American Pharmaceutical Manufacturers

Democrats would impose a 95 percent excise tax on prescription drugs unless drug manufacturers accept government price controls.

In reality, all drug manufacturers would accept the price controls or stop selling the drug in the U.S. market entirely rather than pay the 95 percent tax.

This provision would restrict U.S. medical innovation and limit the supply of new medicines.

Price controls never work because they cause supply shortages. CBO warned the reduction in manufacturers’ revenue could be as high as $1 trillion over the next ten years and would “lower spending on research and development and thus reduce the introduction of new drugs.” 

The CBO further stresses the “uncertainty” in assessing the number of new medicines that would be prevented from coming to market. The agency already revised its original assessment to increase the number of drugs prevented from being introduced by 50 percent. 

$52 Billion Income Tax Hike on Mid-Sized & Family Businesses

Just as the U.S. economy slides into a recession, Democrats are including a tax hike on passthrough businesses with declared losses. This provision widens the net of taxable income. Preliminary cost estimates from the Joint Committee on Taxation show the provision will increase taxes by $52 billion.

Senate Democrats passed an amendment to the bill before final passage that created a two-year extension on loss limitations of noncorporate taxpayers if the amount of the loss is in excess of $250,000 ($500,000 in the case of a joint return). This provision was scheduled to sunset in 2026 under current law.

This provision would raise taxes on a manufacturer, retailer or other capital-intensive business that sees significant business losses in any year due to the cost of wages, rent, new equipment, inventory, and interest payments. 

The loss limitation was originally created by the Tax Cuts and Jobs Act passed by Congressional Republicans but was used to offset the creation of the 20 percent deduction for passthrough businesses, resulting in a net tax cut for these businesses. Senate Democrats have now extended this loss limitation for two additional years to pay for their reckless tax and spend spree. They did not extend the 20 percent deduction for passthrough businesses.

This provision violates President Biden’s campaign pledge to small businesses: “Taxes on small businesses won’t go up.” 

Supersizing the IRS to Increase Audits – $204 Billion

The bill would spend $80 billion to supersize IRS with 87,000 new agents and auditors and ramp up audits on working households and small businesses. The IRS would perform an additional 1.2 million annual audits under the plan. Democrats claim the increased spending on enforcement would net $124 billion.

The bill spends 14 times as much money for “enforcement” — such as small business audits — than for “taxpayer services” — such as answering the phone. IRS employees only answer the phone “19 or 20 percent” of the time.

Categories: Health Care

7 replies »

  1. GW quote is perfect for this albatross, “Fuzzy Math”. As a senior I never come close to spending anywhere near $2k on meds, maybe $200. Free Clot shots? Ill pass and just hang on and wait for my audit.

  2. The $35 cap on insulin was done under Trump, but no one will admit that. Most people do not spend $2000 on meds annually. The lower medication costs do not take place for 4 yrs and only cover 10 medications. Which ones are anyone’s guess.
    Anyone who just got their latest natural gas bill was also notified that there was going to be a 27% increase in our gas price effective on Septembers bill. GMP has already increased our electric bill. To be told that “ this is like a 9.9% overall price hike” is insulting. Last I knew, 27% is certainly more than 9.9%!! Since GMP and VtGas are owned by the same French company, it is double dipping. By the end of the winter ( if not before) there will be fewer Vermonters as a result of these Inflationary Tactics. Some of us lived thru this before when we had Stagflation for 20 yrs. Time for the cranial rectal inversion to right itself!!

  3. The Inflation Reduction Act (IRA) should be renamed to Income Reduction Act and how nice that it would keep the same letter designation (IRA)!!

  4. Poor Phil. he just can’t see thru the smoke of big government. How wonderful that some prescription drug prices will decrease(thru subsidy). Wonderful too, that we will further subsidize health care premiums thru this junk legislation.
    Too bad he can’t talk away the 11.7% Blue Cross or the 18.3% increase in premium (really a tax) for most of Vermont enrolled in the mandated health care scheme.
    As biden took credit for a 25 cent decrease in gasoline prices a month ago- when the cost had risen 2+ dollars a gallon- so too is Phil trying to get us to believe that $750,000,000,000.00 in government spending is a good thing.
    Phil, have a look at your pay stub. I’ll bet that 40+% goes to the federal government,
    8.95% goes to Vermont Dept. of Taxes. Thats almost 50%, before you’ve spent a cent on anything. That’s what my pay stub says- perhaps you get a better deal, Phil?
    Both the Senate and House, by slim democrat/socialist/progressive majorities have voted to enrich themselves, their donors and their cronies with this bill. At no point did any of those voting yes consider their oath of office nor their constituents.
    When the next Vermont legislature meets in January 2023- without a doubt additional taxes and revenues will be the top priority- while the good governor keeps talking about affordability. Will that legislature deem more Vermont Dept. of Taxes armed employees are required to be hired, to keep up the status quo established in Washington this week?

  5. This is the same federal government that can’t seem to deliver mail on time and correctly. The same government that told us if “you like your doctor, you can keep your doctor”. Worse, where it takes 4-9 months to get any appointment for prevent care. The same government that manages the Social security trust fund where the reserves become depleted in 2034. The list goes on and on… Why do citizens continue to put trust into a Government that continues to fail us and enriches itself? It’s Statists like Scott who lie to themselves and lie to us on the State of our Affairs. These bureaucrats are the worst.

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