Inflation Reduction Act

Subject: Economics
Type: Informative Essay
Pages: 3
Word count: 871
Topics: Macroeconomics, Microeconomics


The Inflation Reduction Act of 2022 remains a federal law authorized by the President of the United States, Joe Biden, on August 16, 2022, after being passed by the 117th Congress. Senator Chuck Schumer and Joe Manchin supported this Inflation Reduction Act. It is an amendment to the Build Back Better bill. The Inflation Reduction Act aims to raise finances that boost climate change and establish clean energy, provide subsidies for Affordable Care, regulate drug costs by reducing prices, reduce the deficit, and reform tax (CRFB, 2022). Indeed, the Inflation Reduction Act can contribute both negative and positive effects on the United States economy and the lives of the citizens. Thus, this paper aims to analyze both the positive and negative impacts of the Inflation Reduction Act.

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Positive Effects of the Inflation Reduction Act

The Inflation Reduction Act has a substantial effect on the lives of citizens. For instance, in matters associated with health, the act has a positive effect, like enabling the capability to hold negotiations for the prices of health care within Medicare and an expansion of subsidies within the Affordable Care Act (Levitt, 2022). Moreover, the positive effect of the Inflation Reduction Act is not only based on enlightening the health care systems but also majoring on the establishment of measures for mitigating climate change and providing clean energy; thus, this contributes to the crucial improvement of public health in short-and long-term levels. Indeed, climate change has a direct effect on the health of Americans; for instance, warming climate, heat waves, and wildfires significantly impact human health. Therefore, when the greenhouse gas emission is reduced, it will assist in mitigating climate change and hence reduction of respiratory and other associated illnesses. Furthermore, other than mitigating climate change, the establishment of clean energy can improve public health. For example, providing clean electricity drastically decreases the discharges of pollutants into the atmosphere from the production of fossil, and this will assist in decreasing respiratory illnesses.

Additionally, the Inflation Reduction Act has various provisions that aim at providing energy to homes more efficiently, like tax credits for energy-efficiency retrofits and rebate programs. Indeed, this provision enables indoor air quality, which is critical in enhancing the citizens’ good health. Certainly, the establishment of a clean energy economy that aims at powering societies as well as making them more resilient to life-threatening weather conditions while mitigating the effects of climate change remains a positive public health investment. Notably, the Inflation Reduction Act ensures the usage of wind and solar energy in lower-income communities while ensuring that the organizations are not polluting the environment. For instance, the Inflation Reduction Act charges tax on petroleum and oil companies for cleaning harmful waste sites.

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Negative Impacts of the Inflation Reduction Act

Certainly, the Inflation Reduction Act has several negative impacts on the economy of the United States. The Inflation Reduction Act has negative incentives on matters related to work and investment. As a result of an increase in corporation tax and elevated tax rates on various investments, there is a reduction in incentives for companies to invest. Notably, the Inflation Reduction Act leads to a reduction in production, incomes, and employment per capita by elevating the taxation of labor and business capital (Mulligan, 2022). Notably, the rate of employment decreases because of the elevation in health insurance credits brought by the Inflation Reduction Act. The elevated health insurance credits lead to a rise in the average rate of marginal tax on labor income. In addition, the Inflation Reduction Act elevates corporations’ taxes. Subsequently, the increase in taxes decreases the wages, business capital per worker, and also GDP per worker, and this negatively affects the economy of the United States. The reduction in GDP per worker and also a decrease in the average household income. Notably, the establishment of green energy reduces the real GDP and wages by shifting the resources from being utilized productively, like the usage of fossil to get fuel and drug development, to low-productivity clean energy portions.

Also, the Inflation Reduction Act has a negative impact on work due to an increase in health care subsidies under the ACA; indeed, these health care subsidies are not associated with working. The Inflation Reduction Act affects labor income due to heavy taxation, which aims at increasing the coverage of health insurance. Moreover, the Inflation Reduction Act has a negative effect on the development of new pharmaceutical components due to the control of prices in the pharmaceutical industry (Sarpatwari, 2022). Considering that the Inflation Reduction Act aims to control the price of drugs which will decrease Medicare spending, the control of pharmaceutical products discourages medical innovations by decreasing the profitability of the successful drugs in the market.


In conclusion, the Inflation Reduction Act has a positive impact on the health of Americans; for example, there is the reduction of pollutants and mitigation of climate change. The utilization of clean energy is critical to ensure the reduction of greenhouse gas effects. At the same time, the Inflation Reduction Act has negative effects on Americans; for instance, it discourages investment and work. Negatively, the income of the workers will be affected due to a decrease in job opportunities. Indeed, the tax rates that aim at increasing the coverage of health insurance disincentives work.

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