Senate Passes Climate and Tax Bill After Marathon Debate
Updated: Aug 8, 2022
WASHINGTON — The Senate passed legislation on Sunday that would make the most significant federal investment in history to counter climate change and lower the cost of prescription drugs, as Democrats banded together to push through major pieces of President Biden’s domestic agenda over unified Republican opposition.
The measure, large elements of which appeared dead just weeks ago amid Democratic divisions, would inject nearly $400 billion into climate and energy programs. Altogether, the bill could allow the United States to cut greenhouse gas emissions about 40 percent below 2005 levels by the end of the decade.
It would achieve Democrats’ longstanding goal of slashing prescription drug costs by allowing Medicare for the first time to negotiate the prices of medicines directly and capping the amount that recipients pay out of pocket for drugs each year at $2,000. The measure also would extend larger premium subsidies for health coverage for low- and middle-income people under the Affordable Care Act for three years.
And it would be paid for by substantial tax increases, mostly on large corporations, including establishing a 15 percent corporate minimum tax and imposing a new tax on company stock buybacks.
Initially pitched as “Build Back Better,” a multi-trillion-dollar, cradle-to-grave social safety net plan on the order of the Great Society, Democrats scaled back the legislation in recent months and rebranded it as the Inflation Reduction Act. It was projected to lower the federal deficit by as much as $300 billion over a decade and could help lower costs for Americans in the long term.
Passage of the measure was a major victory for Mr. Biden and Democrats, who are battling to maintain their slim House and Senate majorities in November’s midterm congressional elections. Facing unanimous opposition by Republicans, who have used filibusters to block many elements of their domestic agenda, Democrats took full advantage of the Senate’s special budget rules to force through as much of it as they could with the support of all 50 members of their caucus.
The final tally was 51 to 50, with Vice President Kamala Harris casting the tiebreaking vote. The House planned to interrupt its summer break to reconvene briefly on Friday to clear the measure, sending it to Mr. Biden for his signature.
The Senate vote was the culmination of more than a year of hard-fought negotiations between the party’s progressive core, which demanded a transformational plan that would touch every aspect of American life, and a conservative-leaning flank that sought a much narrower package. Those talks played out against the backdrop of a 50-50 Senate in which any single defection could have killed the effort — and nearly did, several times.
“The caucus overwhelmingly is focused on what’s in this bill — not what’s not in the bill, even though every one of us would want more — because what’s in the bill is so incredible,” Senator Chuck Schumer of New York, the majority leader, said in an interview. “You had to thread the needle.”
As part of its landmark climate and energy initiative, which would put the Biden administration within reach of its aim to cut emissions roughly in half by 2030, the bill would offer tax incentives to steer consumers to electric vehicles and lure electric utilities toward renewable energy sources like wind or solar power. It also includes millions of dollars in climate resiliency funding for tribal governments and Native Hawaiians, as well as $60 billion to help disadvantaged areas that are disproportionately affected by climate change.
For Democrats, passage of the measure capped a remarkably successful six-week stretch that included final approval of a $280 billion industrial policy bill to bolster American competitiveness with China and the largest expansion of veterans’ benefits in more than two decades. But unlike those bills, the tax and climate legislation passed the evenly divided Senate along party lines, condemned by Republicans as federal overreach and reckless spending at a time when prices remain high across the country.
Eager to leave Washington for an August recess, a weary Senate approved the package after a marathon overnight voting session — known as a “vote-a-rama” — that began around 11:30 p.m. on Saturday, in which Democrats united to defeat more than two dozen politically fraught proposals aimed at changing the bill and derailing it.
The measure falls far short of Mr. Biden’s original vision for the plan and the $2.2 trillion measure that the House passed in November. To accommodate the demands and concerns of two holdouts, Senators Joe Manchin III of West Virginia and Kyrsten Sinema of Arizona, Democrats jettisoned billions of dollars for child care, paid leave and public education and set aside plans to roll back key elements of the 2017 Republican tax overhaul. There was little Republicans could do to stop passage once Senators Kyrsten Sinema and Joe Manchin III said they would support the bill. But the final package contained a series of proposals that Democrats have labored for decades to push through. If enacted, it would be the most significant climate law ever put in place in the United States, investing hundreds of billions of dollars over 10 years in tax credits for manufacturing facilities for things like electric vehicles, wind turbines and solar panels, and $30 billion for additional production tax credits to accelerate domestic manufacturing of solar panels, wind turbines, batteries and critical minerals processing. It would also impose a fee to penalize excessive emissions of methane, a greenhouse gas.
The legislation would allow Medicare to negotiate the cost of up to 10 prescription drugs initially, beginning in 2026, and give seniors access to free vaccines. Coupled with a three-year extension of expanded health care subsidies first approved last year as part of the $1.9 trillion pandemic aid law, the package amounts to the largest change to national health policy since the passage of the Affordable Care Act.
To finance much of the plan, the measure would institute a new 15 percent corporate minimum tax that would apply to the profits that companies report on their financial statements to shareholders, known as book income. It would impose a new 1 percent tax on corporate stock buybacks beginning in 2023. The measure also would pour $80 billion into the I.R.S. to bulk up the agency’s enforcement arm and crack down on wealthy corporations and tax evaders. That provision is estimated to raise $124 billion over a decade.
“When I come to the end of my service in the Senate, I’ll look back on the passage of this bill as one of the most significant things that I’ve had an opportunity to work on,” said Senator Tina Smith, Democrat of Minnesota and one of the many climate hawks who pushed for the legislation.
Congressional Republicans hammered the bill as an exorbitant spending package with damaging tax hikes that would inflict more damage to the nation’s economy at a perilous moment. While outside analysis suggested the legislation would reduce the federal budget deficit by the end of the decade and have a limited impact on federal spending, Republicans continued to brand it a “reckless tax and spending spree.”
“Democrats want to ram through hundreds of billions of dollars in tax hikes and hundreds of billions of dollars in reckless spending — and for what?” Senator Mitch McConnell of Kentucky, the minority leader, asked on Saturday. “For a so-called inflation bill that will not meaningfully reduce inflation at all.”
It is the second time in less than two years that Democrats have muscled through a sprawling spending package without any Republican support, following passage of the $1.9 trillion pandemic aid package last year. Since inflation skyrocketed in the months after that measure became law, Republicans warned that Democrats were exacerbating the economic stress facing American families by passing the new legislation.
Passage of the legislation was a triumph for Senator Chuck Schumer, the majority leader, ahead of the midterm elections in November.Credit...Haiyun Jiang/The New York TimesSenator Lindsey Graham of South Carolina, the top Republican on the Senate Budget Committee, announced Saturday evening that he had “thought long and hard about how to explain this to the American people, and the only thing I can tell you is insanity is defined as doing the same thing and expecting a different outcome.”
But there was little Republicans could do to stop passage once Mr. Manchin and Ms. Sinema said they would support the bill. Democrats moved it under the special process known as reconciliation, which shields budget measures from filibusters.
There was a price for Mr. Manchin’s and Ms. Sinema’s support, however.
Mr. Manchin ensured that the interests of his coal-producing state were reflected in the final bill. In addition to securing separate commitments to complete construction of a natural gas pipeline in West Virginia and votes on a measure to help fast-track permits for energy infrastructure, he fought to include tax credits for carbon capture technology and requirements for new oil drilling leases in Alaska’s Cook Inlet and the Gulf of Mexico.
Ms. Sinema extracted her own concessions, including $4 billion to help Western states combat historic drought levels and the preservation of a tax break that allows venture capitalists and hedge fund managers to pay substantially lower taxes on some of their income than other taxpayers.
She also preserved a deduction, known as bonus depreciation, that would benefit manufacturers as part of the corporate minimum tax.
The concessions frustrated liberals, particularly Senator Bernie Sanders, the Vermont independent and Budget Committee chairman who had pushed for spending as much as $6 trillion on the domestic policy package. He was among the members of the Democratic caucus who offered changes to the measure during the all-night voting session, though most Democratic senators opposed their colleagues’ proposals in order to protect the final product.
On Sunday morning, Republicans successfully forced the removal of a $35 cap on insulin prices for patients on private insurance, challenging it as a violation of Senate rules. While Democrats could not secure the 60 votes needed to keep that proposal, a cap on insulin prices for Medicare patients remained untouched in the legislation.
After 2:45 p.m., Democrats emerged after a bruising overnight marathon session with their fragile coalition and the legislation intact.
“This is pretty nearly a political miracle to negotiate with a caucus that is as diverse as we have, from Bernie to Manchin,” said Senator Brian Schatz, Democrat of Hawaii. “This thing got killed and got revived and got killed and got revived — all the way to the end.” Reporting was contributed by Luke Broadwater, Lisa Friedman, Stephanie Lai, Alan Rappeport and Sheryl Gay Stolberg. Senator Joe Manchin III of West Virginia, a conservative-leaning Democrat, has been at the heart of the laborious efforts to enact President Biden’s domestic agenda. While Mr. Manchin helped unlock a $3.5 trillion budget blueprint, he quickly made clear to Democratic leaders that he would be hard-pressed to support more than $1.5 trillion in spending. He rejected the $2.2 trillion bill passed by the House of Representatives as excessive and inflationary, walking away from negotiations in December.