The Inflation Reduction Act (IRA) will lower prescription drug, health care, and energy costs. It will lower the deficit and no one making under $400,000 per year will pay a penny more in taxes. It will also fight climate change. This is a pretty good deal for most of us dealing with our changing climate patterns: scorching temperatures, escalating damaging storms, new monsoon seasons and all the havoc they cause. If we can slow climate change down, we all win.
Lower healthcare costs are a win, as well, for most, for both families and small businesses. If you are a sole proprietor getting your health insurance from the Affordable Care Act marketplace or have employees who use it, health care costs will go down, by up to $800 per year. Because the Biden/Harris Administration has been successful in tackling the climate crisis, the IRA will reduce energy bills, saving families (and small businesses) about $500 per year. With just these two measures, we could save about $1300.00 a year.
But it doesn’t stop there. The IRA will also lower prescription drug costs by capping out of pocket expenses on prescription drugs for people on Medicare at $2,000 per year, cap insulin for Medicare patients at $35 per month and finally allow Medicare to negotiate prices. If you are an older business owner on Medicare, these direct cost savings are for you.
The IRA creates new avenues for small businesses to make profits if they advance in environmental businesses – making and servicing solar panels and wind turbines, retrofitting buildings with energy efficient windows, doors and HVAC units, or entering the supply chain for new electric vehicles, whose components will need to be made in America. And if they want to directly join the climate fight, small businesses can receive a tax credit that covers 30% of the cost of switching over to low-cost solar power – lowering operating costs and protecting against the volatile energy prices. Additionally, small businesses can deduct up to $1.00 per square foot of their business for making high energy efficiency upgrades. The per square foot deduction is boosted if the efficiency upgrades are completed by workers who are a paid a prevailing wage – helping businesses save even more money while providing good paying jobs.
The IRA extends the qualified business income deduction, the pass-through deduction, from 2025 through 2027, providing a 20 percent deduction on business income and extends the popular research and development tax credit and increases how much can be applied to payroll taxes. The R&D credit gives businesses of all sizes the opportunity to reduce the taxes they owe based on a formula calculated using expenses they’ve incurred to develop new products. If the new products fight climate change, it’s a double win.
Rural communities, finally, are not left behind. The IRA will help up to 280,000 farmers and ranchers apply conservation to approximately 125 million acres of land, provide relief for distressed USDA borrowers whose agricultural operations are at risk through loan modifications or payments and provide financial assistance to farmers who have experienced past discrimination in USDA lending programs. We need every farmer to contribute to reducing food inflation and feeding the nation and the world.
Together with his Bipartisan Infrastructure Law, the CHIPS and Science Act, and American Rescue Plan, President Biden’s economic plan is showing that we have the courage to build a future where every American has a fair shot!
Ted James | Region 6 South Central Administrator, U.S. Small Business Administration