The So-Called Inflation Reduction Act - Adviser Investments

The So-Called Inflation Reduction Act

August 14, 2022

Inflation may be leveling out—and that’s before the Inflation Reduction Act even passes into law. This sweeping legislative package seeks to lower energy prices and health care costs, but will it really lower inflation’s impact on you and me?

Tough to say.

When we were bracing for the American Families Plan proposed back in 2021, we had our eyes peeled for some far-reaching reforms: Changes to ordinary and capital gains tax rates, limits on Roth conversions, new required minimum distribution (RMD) rules and some estate-planning techniques were in the congressional crosshairs.

Perhaps those issues will resurface in legislation down the road, but you won’t find them in this bill. However, there are a few high-level points to mention:

  • Medicare Part D premium growth. The bill aims to limit the growth of Medicare Part D premiums to the tune of 6% per year over the next decade. It also allows the government to negotiate the prices for some high-cost drugs. While this could eventually change how we project Medicare expenses for clients, we aren’t making any adjustments just yet.
  • Shorter wait times from Uncle Sam… The IRS is getting a shot in the arm, with a chunk of funding going toward taxpayer services. In theory, this could result in shorter wait times on their help lines. We’ll be checking in with our industrious tax team to see if that holds true.
  • …But potentially more audits. IRS enforcement is also getting a boost in funding. The result could mean a large increase in the number of taxpayer audits. Audits have decreased over the last decade, so the aim of this provision is to bring them closer to historical levels. The IRS has pledged that this would not result in increased audits for households earning less than $400,000 per year and would instead focus on “…large corporate and global high-net-worth taxpayers.”

As Senior Research Analyst Liz Laprade mentioned in Tuesday’s Adviser Takeaway video, investors should know that the Inflation Reduction Act brings good tidings for some industries (including electric vehicle and renewable energy companies) and headwinds for others (pharmaceutical firms and some large-cap companies). Check out her informative take at the link above.

We’ll be keeping our eyes and ears open for any future legislation that may affect you. In the meantime, we’re here anytime you need us.


This material is distributed for informational purposes only. The investment ideas and opinions contained herein should not be viewed as recommendations or personal investment advice or considered an offer to buy or sell specific securities. Data and statistics contained in this report are obtained from what we believe to be reliable sources; however, their accuracy, completeness or reliability cannot be guaranteed.

Our statements and opinions are subject to change without notice and should be considered only as part of a diversified portfolio. You may request a free copy of the firm’s Form ADV Part 2, which describes, among other items, risk factors, strategies, affiliations, services offered and fees charged.

Past performance is not an indication of future returns. Tax, legal and insurance information contained herein is general in nature, is provided for informational purposes only, and should not be construed as legal or tax advice, or as advice on whether to buy or surrender any insurance products. Personalized tax advice and tax return preparation is available through a separate, written engagement agreement with Adviser Investments Tax Solutions. We do not provide legal advice, nor sell insurance products. Always consult a licensed attorney, tax professional or licensed insurance professional regarding your specific legal or tax situation, or insurance needs.

Companies mentioned in this article are not necessarily held in client portfolios and our references to them should not be viewed as a recommendation to buy, sell or hold any of them.

The Planner You Can Talk To is a trademark of Adviser Investments, LLC, registration pending.

© 2022 Adviser Investments, LLC. All Rights Reserved.

Adviser Investments' logo is a registered trademark of Adviser Investments, LLC.