How Biden's Inflation Reduction Act will impact New Businesses in the US
- Andres Vite
- Oct 5, 2023
- 4 min read
Updated: Oct 17, 2023
The 2022 Inflation Reduction Act was signed into law by President Joe Biden on August 19, 2022. The law is a comprehensive package of measures aimed at reducing inflation, promoting economic growth, and creating jobs.
The main points of the law include:
An increase in the tax on fossil fuels: The law increases the tax on gasoline and diesel fuel by 18.4 cents per gallon and 24.4 cents per gallon, respectively. The revenue from this tax increase will be used to reduce the deficit and fund other aspects of the law.
A program to negotiate prices for prescription drugs: The law allows Medicare to negotiate prices for prescription drugs with pharmaceutical companies. This program is expected to save Americans billions of dollars on their prescription drug costs.
An investment in domestic energy production: The law invests $369 billion in domestic energy production, including solar, wind, nuclear, and geothermal energy. This investment is expected to create millions of jobs and reduce the country's reliance on foreign oil.
Tax credits for electric vehicles: The law provides tax credits for the purchase of electric vehicles. This is expected to boost demand for electric vehicles and accelerate the transition to a clean energy economy.
The 2022 Inflation Reduction Act is a significant piece of legislation with the potential to have a major impact on the US economy. The law is still in its early stages of implementation, so it remains to be seen how effective it will be in achieving its goals. We will talk about the main aspects of the law that may affect new investments in the US.
Fossil fuel tax increase
The increase in the tax on fossil fuels is likely to make these fuels more expensive for businesses to use. This could lead some businesses to switch to more energy-efficient technologies or to renewable energy sources. For example, a business that uses a lot of natural gas to power its operations may consider switching to electric heating or installing solar panels.
The increase in the fossil fuel tax could also lead to higher prices for goods and services, which could dampen consumer spending. This could have a negative impact on businesses that rely on consumer spending for their revenue.
Investments in green energies and electric vehicles
The investments in green energies and electric vehicles are likely to create new opportunities for businesses. For example, businesses that manufacture solar panels or electric vehicles are likely to see increased demand for their products. Businesses that provide services related to these technologies, such as installation or maintenance, are also likely to see increased demand.
The investments in green energies and electric vehicles could also lead to new jobs in the US. For example, the construction of new solar and wind farms will create jobs for construction workers, electricians, and other skilled tradespeople. The production of electric vehicles will create jobs for engineers, factory workers, and other skilled workers.
Impact of Inflation Reduction Act Investment on domestic energy production
The 2022 Inflation Reduction Act invests $369 billion in domestic energy production, including solar, wind, nuclear, and geothermal energy. This investment is expected to create millions of jobs and reduce the country's reliance on foreign oil.
The investment in domestic energy production will support the development of new energy projects, such as solar and wind farms, nuclear power plants, and geothermal power plants. This will create jobs in construction, manufacturing, and other industries.
The investment will also help to reduce the country's reliance on foreign oil. The US currently imports about 70% of its oil and 25% of its natural gas. This makes the country vulnerable to price shocks and supply disruptions. By investing in domestic energy production, the US can reduce its reliance on foreign oil and improve its energy security.
The investment in domestic energy production is also expected to have a positive impact on the environment. Solar, wind, and nuclear energy are all clean energy sources that do not produce greenhouse gas emissions. By investing in these energy sources, the US can reduce its reliance on fossil fuels and help to combat climate change.
The $369 billion investment in domestic energy production under the 2022 Inflation Reduction Act will be invested through grants, loans, tax credit and direct investment by a variety of entities, including:
The federal government: The federal government will invest directly in some energy projects, such as nuclear power plants. The government will also provide grants and loans to state and local governments and private companies to support the development of new energy projects.
State and local governments: State and local governments can use their own funds to invest in energy projects, such as solar and wind farms. They can also partner with the federal government to invest in larger projects, such as nuclear power plants.
Private companies: Private companies can invest in energy projects using their own funds or by raising money from investors. Private companies are often involved in the development and construction of new energy projects.
Overall, the 2022 Inflation Reduction Act is likely to have a mixed impact on new business investments in the US. The increase in the fossil fuel tax could lead to some businesses switching to more energy-efficient technologies or to renewable energy sources. However, the investments in green energies and electric vehicles could also create new opportunities for businesses and lead to the creation of new jobs and help on climate change.
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