The House has passed the Inflation Reduction Act of 2022, a sweeping legislative package that looks to lower healthcare costs, fight climate change and increase taxes on some large companies.
The package, which passed in a 220-207 vote, now goes to President Joe Biden, who is expected to sign it into law. The House vote follows a 51-50 party-line approval by the Senate on Sunday, with Vice President Kamala Harris casting a tie-breaking vote.
The legislation will represent a total of $369 billion in tax incentives and subsidies for cleaner forms of energy — the largest single investment in combating climate change in the history of the United States. Most of the debate in the House focused on these climate efforts, as well as the Republicans’ concerns that increased funding to the Internal Revenue Service could blowback on low and middle income Americans.
But it’s the tax changes in the bill that could have the greatest impact on some of the country’s largest financial corporations, including banks.
Among other provisions, the package includes a new minimum tax of 15% that would target corporate profits for firms reporting more than $1 billion in annual income, a roughly $80 billion increase to the budget of the IRS.
The legislation notably doesn’t include a measure earlier supported by the Biden administration that would require banks to report to the IRS how much money flows in and out of individual accounts each year. Financial services lobbyists opposed the measure last year.
The legislation does include a new 1% excise tax on corporate stock buybacks, projected to raise $74 billion over the next decade, according to congressional estimates.
It’s unclear to what degree that new excise tax would affect banks, which represent some of the largest corporations that repurchase the most shares, by dollar value, in the country. Banks have also come under political pressure in recent years from progressives such as Sen. Elizabeth Warren, D-Mass., who have criticized banks’ repurchasing programs as the country recovered from the economic shutdowns of COVID-19.
Jaret Seiberg, a managing director at the Cowen Washington Research Group, said in a note that it’s hard to see companies changing their behavior in response to a 1% excise tax, but that it could become an easy way for Washington to raise additional money to offset new spending.
“That means there is both a risk that it increases higher than 1% in the coming years and that it is extended to keep it from expiring in 10 years as now scheduled,” he said.