President Joe Biden signed the Inflation Reduction Act of 2022 (IRA) into law on Aug. 16. The law is a major accomplishment for Democrats, who have been struggling for months to pass Biden’s ambitious social and climate policies, as well as his vision to raise taxes on the rich. The legislation includes large investments in making health care and prescription drugs more affordable, fighting climate change and taxing wealthy corporations.

While its name claims it will tame soaring inflation, estimates show that the IRA likely won’t do much to reduce inflation. 

Here are the big provisions:

  • Creation of a 15 percent corporate minimum tax rate: Corporations with at least $1 billion in income will have a new tax rate of 15 percent. The tax would likely affect fewer than 150 to 200 companies in a given year. Taxes on individuals and households won’t be increased. Stock buybacks by corporations will face a 1 percent excise tax.
  • Prescription drug price reform: One of the most significant provisions of the IRA will allow Medicare to negotiate the price of certain prescription drugs, bringing down the price beneficiaries will pay for their medications. Medicare recipients will have a $2,000 cap on annual out-of-pocket prescription drug costs, starting in 2025.
  • IRS tax enforcement: The IRS has been sounding the alarm for years about being underfunded and being unable to deliver on its duties. The bill invests $80 billion in the nation’s tax agency over the next 10 years.
  • Affordable Care Act (ACA) subsidy extension: Currently, medical insurance premiums under the ACA are subsidized by the federal government to lower premiums. These subsidies, which were scheduled to expire at the end of this year, will be extended through 2025. Approximately 3 million Americans could lose their health insurance if these subsidies weren’t extended, according to the U.S. Department of Health and Human Services.
  • Energy security and climate change investments: The bill includes numerous investments in climate protection, including tax credits for households to offset energy costs, investments in clean energy production and tax credits aimed at reducing carbon emissions.

Among manufacturers, opinions on the law are divided. 

Companies in the green energy sector are delighted. “The IRA is truly a game changer,” says KR Sridhar, Ph.D., chairman and CEO of Bloom Energy, a manufacturer of solid oxide fuel cells for on-site power generation. “While some companies may benefit from one or two parts of the IRA, we believe that Bloom can capitalize on nine key provisions. They range from the hydrogen production tax credit to tax credits for microgrid and biogas equipment, and support for American factories like ours.”

Abigail Ross Hopper, president and CEO of the Solar Energy Industries Association (SEIA), believes the law will put the U.S. on a path to becoming a world leader in clean energy.

“This new law will help the United States deploy enough clean energy to substantially decarbonize the electric grid and tackle climate change,” says Ross. “It features long-term investments in clean energy and new incentives for energy storage, which give solar and storage businesses a stable policy environment and the certainty they need to deploy clean energy and meet the president’s ambitious climate goals. The bill also includes…support for domestic solar production through new tax credits, [laying] the groundwork for thousands of new manufacturing jobs by the end of the decade.”

On the other hand, the pharmaceutical industry is less than thrilled.

“The president signed into law a partisan set of policies that will lead to fewer new treatments and doesn’t do nearly enough to address the real affordability problems facing patients at the pharmacy,” says Stephen J. Ubl, president and CEO of the Pharmaceutical Research and Manufacturers of America. “We will explore every opportunity to mitigate the harmful impacts from the unprecedented government price setting system being put in place by this law. We will continue to advocate for policies that give patients better and more affordable access to lifesaving treatments and for a system that supports innovation.”

The National Association of Manufacturers (NAM) is also against the act. 

“The NAM remains staunchly opposed to the IRA,” says Jay Timmons, president and CEO of NAM. “It increases taxes on manufacturers in America, undermining our competitiveness while we are facing harsh economic headwinds, such as supply chain disruptions and the highest rate of inflation in decades.

“We appreciate that the ‘book tax’ has been revised to reflect the importance of job-creating investments in machinery and equipment. But that is insufficient. These new taxes will still deliver a blow to our industry’s ability to raise wages, hire workers and invest in our communities. In addition, the proposed direct negotiations over prescription drugs are a form of price setting and antithetical to the open marketplace of the Medicare Part D program. Pursuing price control policies could threaten future innovation and cures.”

The automotive industry has been oddly silent on the law, which extends a $7,500 federal tax credit on purchases of electric vehicles and stipulates that those vehicles—and their batteries—must meet domestic sourcing requirements. The provision aims to establish a supply chain for battery materials in the U.S. The law also removes the 200,000-unit sales cap, so EV models that didn’t meet previous requirements—like the Chevy Bolt and Tesla Model Y—will now be able to benefit from the new incentive.

“Automakers are committed to the electric future and the production of groundbreaking EVs. For the transformation to electrified transportation to really take hold—15, 25, 50 percent of the market—it requires more than just EVs with cutting edge performance, design and technology,” says John Bozzella, CEO of the Alliance for Automotive Innovation.

 “This is a massive undertaking and government has a role to play when it comes to establishing the right conditions for global leadership and success,” he continues. “The manufacturing tax credits and grant funding will help accelerate the domestic industrial base conversion currently underway. Unfortunately, the EV tax credit requirements will make most vehicles immediately ineligible for the incentive. That’s a missed opportunity at a crucial time and a change that will surprise and disappoint customers in the market for a new vehicle. It will also jeopardize our collective target of 40 to 50 percent electric vehicle sales by 2030.”

And yet, there is already some evidence to suggest that the domestic production requirement for the tax credit is having its intended effect. Fisker, the startup luxury EV maker based in Southern California, is assembling its debut vehicle, the Ocean SUV, in Austria in partnership with contract manufacturer Magna International. Now, company chairman and CEO Henrik Fisker says he is looking into ways to assemble vehicles in the U.S. to make sure future models qualify for the subsidy.

It’s hard to argue against lower prescription drug costs and increased domestic manufacturing of solar panels, EVs, fuel cells and other technologies of the future. We’ll see what happens.