Key elements of the legislation:
• Medicare would be allowed to negotiate drug prices, starting with 10 high-priced drugs by the middle of this decade and expanding from there. It would cap out-of-pocket drug costs for seniors enrolled in Part D at $2,000 per year. The Senate parliamentarian spared drugmakers any penalties for increasing prices in the commercial market. The savings to Medicare will be used to pay for three years of subsidized Obamacare premiums.
• Government revenue will be raised from the establishment of a 15% corporate minimum tax on large firms, a 1% excise tax on the value of stock buybacks and an $80 billion boost to the Internal Revenue Service for enforcement.
• The minimum corporate tax would affect fewer than 150 companies in a given year. Tech companies such as Google and Facebook could face the levy. Last-minute changes narrowed its scope in an effort to protect private equity, as well as businesses that invest heavily in equipment and facilities, such as manufacturers.
• The tax on stock buybacks has largely been shrugged off by Wall Street analysts, though some have noted it could spur corporations to issue dividends over repurchasing shares to juice equity prices. Apple Inc., JP Morgan Chase & Co. and Microsoft Corp. have relied on share repurchases as a strategy to boost stock prices in recent years.
The taxes increases are noteworthy for who isn’t affected. Democrats and Biden ran on reversing former President Donald Trump’s 2017 tax cuts, including the corporate rate, which remain untouched. High-earners, including millionaires and billionaires, won’t face higher taxes, either.
Sinema demanded that the bill retain the carried interest tax break for private equity. That request irked many of her fellow Democrats who say there is little justification to provide tax benefits to highly paid investment managers.
The bill also doesn’t address two key priorities for many Democrats: implementing a 15 percent global minimum tax deal that Treasury Secretary Janet Yellen negotiated with nearly 140 countries last year and increasing the $10,000 cap on the state and local tax deduction, or SALT. With Democrats likely to lose a majority in at least one chamber of Congress next year, it’s unclear if either proposal can pass.
Still, Democrats indicated they were satisfied with the outcome. Schumer said the party has been talking about lowering drug prices and curbing climate change for years to little avail.
“This is America’s first real push to fight back in the climate crisis. This is the first time that we have just opened the door for Medicare to be able to negotiate with prescription drug companies,” Massachusetts Democrat Elizabeth Warren said after voting. “And this is the first time that we have said billion-dollar-plus corporations are going to have to pay a minimum tax. All three of those are historic.”