As we near a year since the Inflation Reduction Act passed, many Americans have yet to see much coverage about how the law is taking effect. Here is the progress at the one-year mark of what some call the biggest climate bill in history.
What is the Inflation Reduction Act
The Inflation Reduction Act, a climate bill passed in August 2022, aims to increase domestic manufacturing and incentivize businesses to go green. These incentives are mainly in the form of tax breaks for companies that invest in clean energy. It’s been highly successful; here’s why.
Initial estimates for the cost of the bill was $385 billion over ten years. This figure is now estimated to be $1.2 trillion over the same period after the first year. Although this budget overshoot might appear unfavorable for taxpayers, most of this “cost” will simply result in missed tax revenue. The high costs actually show how massively effective the bill has been in the initial year.
Electric vehicles are one of the biggest industries to benefit from the Inflation reduction act. The bill includes multiple provisions that offer incentives for using and producing electric vehicles. One of these such incentives is the Qualified Commercial Clean Vehicle tax credit. It will provide up to a $40,000 tax credit, making buying an electric vehicle cheaper for some businesses than a diesel vehicle.
For the manufacturing industry, this means that the Inflation Reduction Act takes one of the most holistic approaches to a shift to clean energy for nearly every aspect of the production process.
Advanced manufacturing is one of the two categories to benefit from the Inflation Reduction Act. In a handful of programs the act creates, tax credits are given to domestic manufacturing facilities meeting energy output requirements. Combined with the EV credits, these credits are likely contributing to the US factory boom created by long-term reshoring efforts. This is a big win for US manufacturing and the entire economy.
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