On Aug. 16, President Biden signed the Inflation Reduction Act of 2022 (IRA). While the bill claims it will, “make a historic down payment on deficit reduction to fight inflation, invest in domestic energy production and manufacturing, and reduce carbon emissions by roughly 40% by 2030,” plumbing associations aren’t convinced the IRA will do much — if anything — to reduce inflation or benefit small businesses or the American consumer.
The American Supply Association (ASA), Plumbing-Heating-Cooling-Contractors National Association (PHCC) along with more than 70 other organizations wasted no time addressing their concerns, forming a coalition to oppose the bill and work towards amendments.
What is lacking?
Stephen Rossi, ASA’s director of government affairs, describes the IRA, as it is currently passed, as a mixed bag for ASA members.
“The legislation does little to help reduce inflation or assist small, family-owned businesses that are the true drivers of the American economy. Several independent entities, including the nonpartisan Congressional Budget Office (CBO) have shown that the bill will cause increased inflation, at least in the short term,” Rossi explains. “While it is encouraging that there is a deficit-reduction component in the bill, our industry takes pause with the IRS receiving added funding to hire an additional 87,000 IRS agents, with the intention to perform more audits on individuals and small businesses alike. While taxpayers should always pay what they rightfully owe, there will be an increased financial burden should they be audited, not to mention the additional time invested.”
The bill uses incentivizing techniques for states and utility companies, in hopes to speed up decarbonization efforts, but, according to Joel Long, Plumbing-Heating-Cooling Contractors' National Association (PHCC) president, these incentives seem like forced efforts that won’t benefit the greater good.
“Incentivizing states and utility companies to speed up their decarbonization efforts, banning natural gas in new construction and major renovations, and moving proposals through legislatures and building code committees with little public awareness or input, seem to be forced efforts to pick winners and losers without fully understanding the ramifications of such an act,” he says.
Long continues, pointing out that the bill does not address how these incentives will impact consumers or the energy grid.
“These policies will have a profound impact on our industry. While there are tax incentives for contractors and customers performing energy-efficient HVAC upgrades in the IRA that we certainly support, it is a tradeoff we weren’t willing to make,” he says. “A smarter approach would be to ensure we strengthen our national energy outcomes with more fuel choice, including natural gas, which leads to a stronger American policy. This in turn will help us lead the world through strength and innovation with fossil fuels, nuclear, hydroelectric and, yes, a long-term transition to ‘smart’ renewables in certain situations and applications.”
Since the onset of the pandemic, the federal government has pumped billions of dollars into the economy. Rossi notes that as a result, federal spending has ballooned, the employment situation has become mercurial, and supply chain and production issues have had an unfavorable effect on inflation.
Rossi says that ASA believes lawmakers need to weigh the importance of federal spending more carefully moving forward.
“While the support of our economy was clearly needed to keep businesses operating during the COVID-19 lockdown, lawmakers need to weigh the importance of similar funding mechanisms moving forward,” he says. “Our industry is a major contributor to the housing and construction sectors, which make up a large portion of consumer confidence. As interest rates go up and confidence falls, it makes it more challenging for our members. The federal government can help address inflation by being more reserved about how it is spending money, how quickly the economy is slowed down through interest rate hikes and how it addresses ongoing supply chain issues.”
Both associations agree the answer to addressing inflation lies in reducing the financial burdens placed on small and mid-sized businesses.
“Provisions in the IRA — like extending the cap on the amount of losses a small business can claim on their taxes — is not a good start. We need to look at how we can reduce financial burdens on small and mid-size businesses to mitigate inflationary pressure, not tax them more,” Long says. “We need to be more energy independent, and we need our tax policy to be simpler and reward working people and companies that produce in the United States.”
ASA agrees, pointing out in a recent press release that, “Inflation is at 40-year highs, there have been two consecutive quarters of negative economic growth and there is a shrinking small business sector, yet the Inflation Reduction Act does nothing to address these immediate issues, even as it increases the burden of the tax code shouldered by America’s small and family-owned businesses.”
The coalition ASA is part of wrote a letter addressed to Speaker of the House Nancy Pelosi, House Minority Leader Kevin McCarthy, Senate Majority Leader Chuck Schumer and Senate Minority Leader Mitch McConnell stating, “The Biden Administration claims the savings in the IRA are ‘front-loaded,’ and will reduce the deficit in the short-term, helping ease inflationary pressures. That is simply not the case. Recent analysis by the Congressional Budget Office, Penn-Wharton and others shows the Inflation Reduction Act would increase prices in the short term and do little to bring them down in the long run.”
In addition to rising costs in the short term, the IRA would give the IRS an additional $80 billion in funding, more than half of which would pay for thousands of additional IRS agents to conduct millions of additional audits — something else not of benefit to ASA or PHCC members.
Not all professionals in the PHCP industry are opposing the IRA legislation. General President of the United Association (UA) Mark McManus took to Facebook Watch to update members on the passing of the IRA and the CHIPS Act, calling the IRA a “gold mine for all UA work.”
“The funding will go toward existing nuclear power plants, which is desperately needed. It’s going to be for hydrogen hubs, new nuclear plants, etc.,” he says. “There is $500 million set aside for heat pumps, $1 billion for retrofitting buildings and $5 billion for natural gas plant upgrades. All of these things go right along with UA’s mantra of all of the above energy approaches.”
McManus goes on to say he believes we are in the midst of a manufacturing revolution. “We have all been through a lot over the past couple of years, and I think we have learned — and hopefully the politicians have learned — that we need to bring manufacturing back to the United States.”
McManus says he believes the IRA should be viewed as a bipartisan bill. “This isn’t a democratic bill or a republican bill, this is an American bill. And quite honestly, I believe this is a UA bill.”
Actions moving forward
As we can see, there is much to dissect when looking at whether or not this new bill will benefit members of the skilled trades, the manufacturing sector, small-to-mid-sized businesses or ultimately the consumer. It seems there are pieces of legislation that will benefit some and hinder others.
Mostly concerned with addressing unnecessary regulations and taxation issues the IRA presents, ASA is working to protect its members.
“ASA has worked both individually and with coalition partners to fight unnecessary regulatory and taxation issues that may adversely impact our members,” Rossi states. “We will continue to do so for the remainder of this session and look forward to building new relationships in 118th Congress to make sure common-sense policies are enacted for our industry.”
PHCC is focusing its efforts on protecting the natural gas sector. “PHCC will continue to advocate for its members and clients at the state and local level where bans on natural gas are occurring, and educate federal lawmakers on the importance of including natural gas in a clean energy future,” Long says. “As part of the message that fuel gasses must remain a critical part of the U.S. energy portfolio, PHCC will support efforts to develop renewable natural gas and hydrogen fuels as a means to maintain the vast installed infrastructure of residential and commercial HVAC and water heating products.”
According to Long, contractors and their customers need to tell legislators that natural gas must remain part of a secure and balanced national energy policy, and that the costs of electrification are too expensive for many homeowners.“There is nothing stopping people who can afford it from electrifying their homes today. PHCC contractors will happily help them do it, but this should be market-driven and not be forced upon the country. Congress should not be encouraging states and utilities with financial incentives to do this,” he says.
No matter what opinions you have regarding the Inflation Reduction Act — or any government affairs matter moving forward — it is always key to stay informed and engaged with your industry associations that are working with your benefit in mind.
“We are always doing our utmost to engage with our members and industry partners to keep them apprised of our advocacy efforts,” Rossi says. “We encourage them to stay engaged by contacting their legislators, inviting lawmakers to their businesses, and speaking with their employees about the importance of their vote in November. We are lucky to have so many members that have a deep understanding of how government legislation and regulations have directly affect our industry, businesses and employees. “