FACTSHEET: How the Cut Inflation Act will help small businesses
By signing the Cut Inflation Act, President Biden is delivering on his promise to build an economy that works for working families and small businesses. The Cut Inflation Act makes urgent investments to reduce prescription drug costs, health care costs, and energy costs to create opportunities for America’s 33 million innovative small businesses and startups. This is the most aggressive action we have taken to address the climate crisis. This will help the Fed fight inflation by reducing the deficit. The super rich and big corporations are being asked to pay their fair share, and no small business or family earning less than $400,000 a year will pay a penny more in taxes.
President Biden and congressional Democrats pushed back against special interests to pass this landmark legislation aimed at America’s families and small businesses and growing the economy from the bottom up and middle.
Reduced costs for small businesses
The Cut Inflation Act will reduce costs for small businesses by keeping healthcare costs lower, supporting energy-efficient investments and building supply chain resilience.
Preserve critical support for small business health care costs. The Cut Inflation Act would preserve the US bailout premium tax credit supports for Affordable Care Act (ACA) plans by extending them through 2025. According to a recent analysis of 2021 tax data issued by the Department of Health and Social Services, ACA Marketplace is a major source of coverage for 2.6 million small business owners and independent adults. Additionally, small business owners and self-employed people make up 25% of Marketplace listings among working-age adults. Since the implementation of the ACA, the uninsured rate for the self-employed has dropped dramatically, from 30% in 2013 to 20.5% in 2019, resulting in a 1.3 million uninsured independent adults. Globally, on 13 million Americans will save on average about $800 annually on their health insurance premiums compared to what they would pay without the Inflation Reduction Act. This investment will continue to drive new business start-ups and job creation, as entrepreneurs can take the leap into starting a business without risking going uninsured.
Reduced energy costs for small businesses. The Inflation Reduction Act includes a number of provisions that will save small business owners money on energy costs:
- Small businesses can benefit from a tax credit that covers 30% of the cost of switching to low-cost solar power, which lowers operating costs and protects against the volatility in energy prices that weighs down currently on small business.
- Small business owners can receive a tax credit of up to $5 per square foot to support energy efficiency improvements that reduce utility bills.
- Small businesses that use large vehicles such as trucks and vans will benefit from tax credits covering 30% of purchase costs for clean utility vehicles, such as electric and fuel cell models.
By saving on energy costs, small businesses will also help tackle the climate crisis. The increased frequency and scale of natural disasters put more small businesses and communities at risk of devastation and disruption. The historic action of the Cut Inflation Act on climate change will ensure economic stability and growth for main streets across the country.
Reduce the deficit to fight inflation. The Inflation Reduction Act is more than fully paid for and will lead to deficit reduction over the next decade. This will build on the significant debt reduction that took place under the Biden-Harris administration. The administration is expected to achieve more than $1.5 trillion in deficit reduction this year, after reducing the deficit by more than $350 billion last year. It will be the largest one-year drop in our nation’s history and will leave a deficit lower than the Congressional Budget Office projected before the US bailout was passed. And many leading economists and commentators have argued that building on the deficit reduction we’ve achieved to date under President Biden with hundreds of billions of additional dollars in deficit reduction, the reducing inflation will help ease inflationary pressure. When small businesses operate with greater price stability, in costs ranging from gas to wages, it will be easier for entrepreneurs to plan and grow their businesses.
Reduced prescription drug costs for seniors. Many small businesses are owned by older people. Americans pay 2-3 times more for their prescription drugs than people in other wealthy countries. High prices contribute to racial and ethnic inequalities in health. The Inflation Reduction Act will help close the drug access gap by improving prescription drug coverage and reducing drug prices in Medicare. The law:
- Caps the amount seniors will have to pay for prescription drugs they buy at the pharmacy at $2,000 a year.
- Caps the amount seniors will pay for insulin at $35 for a month’s supply.
- Provides access to a number of additional free vaccines, including the shingles vaccine, for Medicare beneficiaries.
- Will further reduce prescription drug costs for seniors by allowing Medicare to negotiate the price of expensive drugs and by requiring drug manufacturers to pay a rebate to Medicare when they raise prices faster than inflation.
Increase economic opportunities for small businesses
The Cut Inflation Act will help small businesses grow and create well-paying jobs in communities across America.
Double the research and development (R&D) tax credit for small businesses. Pre-revenue startups create jobs and support economic growth through research, discovery and innovation. However, they were not able to benefit from the R&D tax credit to the same extent as large companies. This bill levels the playing field and will help boost their high-impact R&D, by increasing the refundable research and development tax credit for small businesses from $250,000 to $500,000. Starting in 2023, small businesses will be able to use the credit to further reduce payroll taxes and several other business expenses by up to $500,000 a year so they can do what they do best: innovate and commercialize. to solve global problems and create jobs to propel our economy forward. .
Boost American manufacturing and competitiveness. The act unlocks opportunities for small businesses and invests in American workers and industry by boosting American supply chains through technologies such as solar, wind, carbon capture and clean hydrogen, at a time when countries around the world are struggling to lead the clean energy economy. . The legislation includes targeted tax incentives aimed at manufacturing US-sourced materials such as batteries, solar and wind parts, and technologies such as carbon capture systems and electrolyzers to make hydrogen. The legislation also includes key requirements for domestic sourcing – for example, for the use of domestic steel in wind projects – and for prevailing wages and apprenticeships to ensure the creation of well-paying jobs.
Support local clean energy economies: The law creates a new clean energy and sustainability accelerator, which will create national and local clean energy financing institutions, supporting the deployment of distributed zero-emissions technologies such as heat pumps, community solar and electric vehicle charging. This accelerator will expand opportunities for clean energy entrepreneurship while prioritizing more than 50% of its investments in disadvantaged communities.
Develop rural opportunities. The law significantly expands the Rural Energy for America program, which supports small rural businesses and agricultural producers through clean energy and energy efficiency improvements. The US Department of Agriculture estimates that this expansion will reach more than 41,500 small businesses and farms. The act also provides more than $9 billion to help rural electric cooperatives, which serve more than 21 million businesses, homes and farms, build resilience, reliability and affordability, including through clean energy projects.
Level the playing field by reforming the tax code
President Trump and congressional Republicans’ tax bill of 2017 only made an unfair tax system worse. The Cut Inflation Act of 2022 is a crucial step in making our tax code fairer. It will increase revenue by:
- Make sure the ultra-rich and big corporations pay the taxes they already owe.
- Tackle large, profitable corporations with over $1 billion in annual profits that currently get away with paying little or no federal income tax.
- Impose a 1% surtax on corporate stock buybacks that will incentivize companies to invest.
Small businesses and working families will have better access to the benefits they are entitled to under the tax code and can get their questions answered quickly and efficiently, thanks to the law’s transformational investments in the Internal Revenue Service. Treasury Secretary Janet Yellen directed the Internal Revenue Service not to use any of the additional funds provided by the bill to increase the share of small businesses or households below the $400,000 threshold that are audited from historical levels. This will help ensure that no family or small business earning less than $400,000 a year will see their taxes rise by a single penny.