How N.C. will be affected by ‘Inflation Reduction Act’ signed into law this week
On Aug. 16, President Joe Biden signed the “Inflation Reduction Act” into law. So how will North Carolinians be affected by the large, multi-faceted bill?
The first element many wonder about is whether the so-called “Inflation Reduction Act” will actually reduce the inflation they have been struggling with at the gas pump, grocery store, and nearly everywhere else.
According to University of Pennsylvania’s Wharton Budget Model, an advanced economic analysis, it appears the answer is no. The PWBU determined “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.”
The reason for the 0.1% decrease over the decade was that the model found that the act “would reduce cumulative deficits by $264 billion over the 10-year budget window.”
The Congressional Budget Office also predicted the bill would reduce budge deficits, but by less than half that amount, with $102 billion shaved off the budget after a decade.
Another key question many have is whether North Carolinians will see more taxes due to the bill. A lot of debate occurred over whether the 87,000 new IRS agents funded in the bill will only target those making over $400,00, since Biden promised during his campaign not to raise taxes on anyone beneath this threshold.
Democrat messaging on this has been that the “rate of audits” that those making under $400,000 face will not increase. But if the number of audits skyrockets, which is expected, then the absolute number of audits experienced by those making under $400,000 will skyrocket as well, even if their rate, or proportion of these audits, does not.
The Wharton Budget Model noted that there are also tax increases in the bill that directly affect lower-income households, saying, “Most, but not all, of the tax increases fall on higher income households,” and specifically said, “We find that all income groups would bear some of the additional burden of the 2023 revenue-raising business tax changes.”
The bill is cited just as often for acting to combat climate-change as it is for combating inflation, owing to the $369 billion of spending on green-energy programs. This money will trickle down to states like North Carolina in tax credits and grants for buying electric vehicles, manufacturing wind and solar equipment, and much more.
North Carolinians could be effected by this in higher costs, as wind and solar cost more for the amount of energy produced. More wind and solar could also lead to environmental damage caused to wildlife and water resources, as is often found where these power sources are used.
Fewer drugs (and jobs) from the pharmaceutical industry
One element of the bill that has not been commented on as much as the taxes and green energy is the new “negotiation power” that the Centers for Medicare and Medicaid Services (CMS) will have when paying for drugs. While many North Carolinians will benefit from lower initial costs on drugs, industry leaders warn that it will come at the cost of research and development of new drugs.
North Carolina’s Research Triangle is a national leader in drug research and development. Laura Gunter, president of North Carolina Biosciences Organization, recently wrote an op-ed for WRAL Techwire warning of the dangers to this industry.
“What the new law would do is allow bureaucrats at the Centers for Medicare Services to arbitrarily set prices for certain medicines,” Gunter said. “If the manufacturer of the medicine doesn’t like the price offered, that’s fine. The government will instead hit the manufacturer with a 95% tax on the profits earned by the medicine.”
She said this “absurd policy” would end up having “a dramatic chilling effect on investment to create new treatments and cures.” According to an analysis she provided, only six of 110 therapies analyzed would have made it to market under this new law.
How N.C. legislators voted
Both of N.C.’s U.S. senators, Thom Tillis and Richard Burr, voted against the bill when it passed the Senate. Afterwards, when the bill went back to the U.S. House for concurrence, all Republicans from N.C. voted “nay” and all Democrats “yea,” as can be seen in the chart below.