The Democrats’ Inflation Reduction Act (IRA) will see Americans forking out more for electricity and gasoline, experts have warned.
President Joe Biden on Tuesday signed the Democrat-backed IRA into law as the country battles with soaring inflation, which stood at an annual rate of 8.5 percent in July.
Democrats say the $700 billion spending bill, which includes nearly $80 billion in IRS funding and a 15 percent minimum tax on corporations, will bring in $725 billion in new revenue to the federal government and reduce the deficit by around $292 billion annually.
Along with spending on tax credits and loans to bolster cleaner technology, an $11.7 billion tax on crude oil and petroleum products will also be reinstated.
A methane fee for certain types of waste will also be introduced, and is expected to generate $6.5 billion in federal revenue from natural gas producers. Methane is commonly used to heat homes during the winter.
Finally, the bill would more than double the excise tax rate on coal, which is set to raise another $1.2 billion in federal revenue, according to Democrats.
However, Mike Palicz, the federal affairs manager at Americans for Tax Reform, said he believes these taxes will ultimately be passed on to consumers.
“Those are three taxes that are going to be passed on to consumers in the form of higher energy bills, higher gas prices,” Palicz told FOX Business in an interview. “It will absolutely increase gas prices.”
“They’re out there claiming they’re doing what they can, which is basically Strategic Petroleum Reserve releases and failing to negotiate with the Saudis, but here they are hiking taxes on oil production,” he continued.
Higher Bills for Consumers
Specifically, the bill “permanently reinstates the Hazardous Substance Superfund financing rate for certain excise taxes, including the excise tax on domestic crude oil and imported petroleum products at the rate of 16.4 cents per barrel in 2023, adjusted annually for inflation.”
“That’s assessed largely on imports coming in,” Palicz said. “That means higher inputs for refiners, which then get passed on to consumers in the form of higher gas prices.”
In a letter to Congress last year, the American Gas Association warned that the methane fee could see consumers paying an extra 17 percent on their natural gas bill, which amounts to more than $100 per year for the average American family.
In an Aug. 12 statement, American Petroleum Institute (API) President and CEO Mike Sommers said that while the new bill takes important steps toward new oil and gas leasing, it fails to address America’s long-term energy needs and further discourages needed investment in oil and gas.
“API shares the goal of addressing climate change, as evidenced in the policies we support and in the actions that our industry is taking every day,” said Sommers. “However, the considerable tax increases are simply the wrong policies at the wrong time.”
“From a new corporate minimum tax to an $11.7 billion tax on crude oil and petroleum products to a new natural gas tax, this legislation imposes additional costs on American families and businesses at a time when policymakers should be looking for solutions to provide relief. The bill also fails to address permitting reform, which is essential to effectively delivering affordable, reliable energy to consumers in a growing economy.”
Energy prices were up 32.9 percent over the past year in July, according to the Bureau of Labor Statistics, while the electricity index was up 15.2 percent year over year.
While gasoline fell 7.1 percent in July, it is still up 44 percent from a year ago.