(CNN) — The Senate on Sunday afternoon voted to pass the Democrats’ comprehensive health and climate legislation and send it to the House of Representatives, in a significant victory for President Joe Biden and his party.
That Bill – called the Inflation Reduction Act – would represent that largest climate investment in US history and make major changes in healthcare policy by empowering Medicare for the first time to negotiate the prices certain prescription drugs and extending expiring healthcare subsidies by three years. The legislation would reduce the deficit, be paid by new taxes — including a 15% minimum tax on large corporations and a 1% tax on stock buybacks — and strengthen the Internal Revenue Service’s ability to collect.
It would collect over $700 billion in government revenue over 10 years and spend over $430 billion to reduce carbon emissions and extend health insurance subsidies under the Affordable Care Act and the rest of the new revenue used to reduce the deficit.
The package is the result of careful negotiations, and passing it would give Democrats a chance to achieve important policy goals ahead of the upcoming midterm elections.
The Democrat-controlled House of Representatives, which is expected to take up the legislation Friday, Aug. 12, must approve the bill before Biden can sign it into law.
Senate Democrats stayed closed to pass the bill by a slim 50-seat majority, using a special procedure to approve the measure with no Republican votes. The final passage came after a marathon series of contentious amendment votes known as “vote-a-rama” that spanned from late Saturday night through Sunday afternoon.
How Senate Democrats passed the law in a party-line vote
Senate Democrats have long hoped to pass a signed bill that would include key agenda items for the party, but have struggled for months to reach an agreement that has the full support of their group.
Senator Joe Manchin played a key role in shaping the legislation — which only moved forward after Democrat and West Virginia Senate Majority Leader Chuck Schumer announced a deal in late July, a major breakthrough for Democrats after previous negotiations stalled were advised.
Arizona Sen. Kyrsten Sinema offered critical support Thursday night after party leaders agreed to amend new tax proposals and indicated she would “push forward” the comprehensive economic package.
But Sinema, Manchin and other senators worked all weekend to make crucial changes to the bill.
To avoid a last-minute failure of Sunday’s bill, Democrats crafted a plan to win over Sinema, who was concerned about the impact of the 15% minimum tax on private equity-owned subsidiaries. Senate Democrats accepted a tighter tax proposal, but instead of paying for it through changes to state and local tax withholdings, which would have met with opposition from some House Democrats, they instead extended the limit on the amount of losses companies can deduct for an additional two years.
Republicans used the “vote-a-rama” weekend to embarrass Democrats and force politically hard votes. They also managed to remove a key insulin provision to cap the price of insulin in the private insurance market at $35 per month, which the Senateman said was inconsistent with Senate voting rules. The $35 insulin cap for Medicare beneficiaries remains in place.
How the draft law addresses the climate crisis
While economists disagree about whether the package actually lived up to its name and reduced inflation, particularly in the short term, the draft law would have a decisive impact on reducing CO2 emissions.
The nearly $370 billion clean energy and climate package is the largest climate investment in U.S. history and the biggest victory for the environmental movement since the landmark Clean Air Act. It also comes at a critical time; This summer saw intense heat waves and deadly floods across the country, both linked to a warming planet, scientists say.
Analysis by the office of Senate Majority Leader Chuck Schumer, along with several independent analyses, suggests the measure would reduce US carbon emissions by up to 40% by 2030. Tough climate legislation from the Biden administration and state action would be needed to get to President Joe Biden’s goal of cutting emissions by 50% by 2030.
The bill also includes many tax incentives designed to reduce electricity costs through more renewable energy and encourage more American consumers to switch to electricity to power their homes and vehicles.
Lawmakers said the bill represents a monumental victory and also just the beginning of what is needed to tackle the climate crisis.
“This is not about the laws of politics, this is about the laws of physics,” Democratic Senator Brian Schatz of Hawaii told CNN. “We all knew that in this effort we had to do what science tells us we have to do.”
Key health care and tax policies in the bill
The bill would authorize Medicare to negotiate prices for certain expensive drugs administered in doctor’s offices or purchased at pharmacies. The Minister of Health would negotiate prices for 10 drugs in 2026 and for another 15 drugs in 2027 and again in 2028. The number would rise to 20 drugs per year for 2029 and beyond.
This controversial provision is far more limited than those that House Democrat leaders have supported in the past. But it would open the door to achieving a long-standing party goal of allowing Medicare to use its weight to lower drug costs.
Democrats also plan to extend improved federal premium subsidies for Obamacare coverage through 2025, a year later than lawmakers recently debated. That way they wouldn’t be phased out shortly after the 2024 presidential election.
To boost revenue, unlike the Internal Revenue Service, the bill would impose a minimum 15% tax on income that large corporations report to shareholders, known as book income. The measure, which would raise $258 billion over a decade, would apply to companies with profits over $1 billion.
Concerned about how this provision would affect certain companies, particularly manufacturers, Sinema has suggested she push through changes to the Democrats’ plan to reduce how companies can deduct depreciated assets from their taxes. The details remain unclear.
However, Sinema thwarted her party’s efforts to close the carried interest loophole, which allows investment managers to treat much of their compensation as capital gains and pay a long-term capital gains tax rate of 20% instead of income tax rates of up to 37%.
The provision would have increased the length of time that investment managers’ earnings shares must be held from three to five years in order to benefit from the lower tax rate. Closing that loophole, which would have netted $14 billion in a decade, had been a longtime goal of Congressional Democrats.
In its place was a 1% consumption tax on corporate stock buybacks, which raised an additional $74 billion, according to a Democratic advisor.
This story and headline have been updated with additional developments.
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