CBO Scores IRA with $238 Billion of Deficit Reduction

The Congressional Budget Office (CBO) just released a final score of the Inflation Reduction Act, finding it would reduce deficits by $238 billion over a decade.

The final legislation included a number of changes from the original version, which was estimated to save over $300 billion through 2031. These changes – some made for procedural reasons – included the removal of the inflation cap on commercial drug prices and the carried interest provision, modifications to the corporate book income minimum tax, inclusion of a 1 percent tax on stock buybacks, more generous Medicare coverage of insulin, extension of existing limits on loss deductibility for pass-through entities, and removal of flexibilities for IRS pay and hiring authority. CBO also reduced its estimate for revenue from increased IRS funding as a result of new guidance from the Treasury Department limiting audits for households making less than $400,000 per year and the aforementioned removal of pay and hiring flexibilities.

By our estimates, the legislation includes $738 billion of offsets to fund roughly $499 billion of new spending and tax breaks. It would reduce deficits by $238 billion over a decade, including by more than $61 billion in 2031 before interest.

Inflation Reduction Act Summary

*IRS funding provision involves an $80 billion expenditure over ten years, which CBO estimates will yield $180 billion in additional revenue for a net savings of $100 billion.

Figures may not sum due to rounding.

If the temporary extension of expanded health care subsidies were made permanent without offsets, we estimate the legislation would reduce deficits by roughly $90 billion over a decade. We have not yet updated our long-term estimates.

See the full CBO score here.