On Tuesday, August 16, President Biden signed the Inflation Reduction Act of 2022 (Act) into law. The Act covers climate issues, taxes, healthcare, and other legislation in one bill, serving as a concise version of the Build Back Better bill.
What is the Inflation Reduction Act?
The main points of the Inflation Reduction Act of 2022 include:
- 15% minimum corporate tax rate: Corporations that generate at least $1 billion in income will now have a 15% tax rate, and stock buybacks will have a 1% excise tax.
- IRS investments: The IRS will receive $80 billion to hire new agents over the next ten years.
- Prescription drug price reform: Medicare will now be able to negotiate the prices of particular prescription drugs, and in 2025 Medicare recipients will receive a $2,000 limit on annual out-of-pocket prescription costs.
- ACA subsidy extension: The current medical insurance premiums under the ACA, which were set to expire January 1st, 2023, will now be extended through 2025.
- Investments in energy security and climate change efforts: Households will receive tax credits to offset energy costs, the government will invest in clean energy production, and there will be tax credits for reducing carbon emissions.
On August 7, the Inflation Reduction Act went to the Senate and passed with 50 Democratic votes and zero Republican votes. Once it reached the House on August 12, bill 220-207 was passed.
Ultimately, small businesses and hardworking Americans will profit from this legislation through the investments in deficit reduction, increased manufacturing, lowered drug prices, and the push for corporations to give back to their community. But what does this bill mean for owner-operators within the transportation industry?
What Owner-Operators Need to Know
The Inflation Reduction Act will make significant changes to the United States environmental policies, health care policies, and tax codes. However, for owner-operators and other small trucking businesses, the Act’s extended changes to the ACA subsidies and IRS investments will likely be the most impactful.
The increased and extended ACA subsidies will allow owner-operators without employer-provided health insurance access to affordable health care coverage. Marc Ballard, who handles the NAIT’s various health care avenues, said, “We’re seeing about 90% of people who enroll can get a plan for $100 a month. Take, for example, a guy who may be 45 with a spouse and two kids, lives in Florida, and expenses a bunch of his income. … Let’s say his net adjusted income is $60,000. He grossed $200,000, but the reportable income is $60,000. He could literally be paying zero dollars for a health care plan.” Those making more money may face an increase in coverage costs by just a few hundred dollars a month.
And while the ACA subsidy changes won’t affect independent business people as much, it’s wise to use this extension period to shop for different health care plans. Freight rates are slowing due to the rise in fuel costs, and owner-operators’ incomes fluctuate as the pandemic period breaks down. So, now is the time to consider income projections and any potential family or personal status changes, which could unlock new health-expense savings.
The $80 billion investment in creating a larger Internal Revenue Service could also pose a threat to owner-operators with more frequent audits. The Associated Press did disclose that armed agents will not come knocking on owner-operators’ doors unless they are under criminal investigation for dealings in things such as contraband. Truck drivers must also be conscious of their increased chance of being audited. And while the IRS does have a backlog, the 87,000 incoming agents will quickly clear it, making time for them to look at newer returns. So, be sure to be extremely thorough when filing your taxes.
The Future is Green
The $369 billion investment in green energy will also notably change the trucking industry. In the next few years, trucking companies could receive tax incentives to purchase trucks that operate on alternative fuel sources, including electricity and biogas. Similar tax incentives will be made available for installing supportive infrastructure at trucking headquarters. The bill will also offer grant and loan programs to trucking businesses to encourage and fund their switch.