Repealing IRA Green Subsidies Could Fund Trump’s Tax Cuts
My latest at IWF.
With looming budget reconciliation talks and broad tariffs going into effect, I prefer a strategy of first making the 2017 tax cuts permanent and coupling this with repealing the Inflation Reduction Act (Act).
More on this shortly.
But what is budget reconciliation? And will the 119th Congress pass President Trump’s preferred “one big beautiful bill”? Per the Congressional Budget Office (CBO), reconciliation is defined as follows:
Budget reconciliation is an expedited process for considering bills that would implement policies embodied in a Congressional budget resolution.
The Bipartisan Policy Center adds:
Budget reconciliation is a legislative procedure made available as a result of the 1974 Congressional Budget and Impoundment Control Act. Reconciliation allows for expedited consideration of certain and specified changes in law to align spending, revenue, and the debt limit with agreed-upon budget targets. Over the 50-year history of the Act, 23 budget reconciliation bills have been enacted, most recently the 2022 Inflation Reduction Act.
Going off of recent proposals from the Tax Foundation and a new CATO Institute study warning about ballooning IRA costs if left permanent, the easy solution for Congress - if ever - is to pair the two. After all, the IRA was passed in reconciliation. As were the 2017 Trump 1.0 tax cuts.
Here’s what I wrote at IWF last week.
As Congress debates a “one big beautiful” reconciliation bill, one prominent tax organization has floated a unique idea to pay for President Trump’s 2017 Tax Cuts and Jobs Act (TCJA): repealing the Biden-era Inflation Reduction Act (IRA) green subsidies.
The nonpartisan Tax Foundation is floating four IRA reform proposals—including full repeal—as a way to make Trump’s first-term tax cuts permanent. Alex Muresianu, a federal analyst at Tax Foundation, argued that repealing the IRA could help pay for expiring TCJA tax cuts.
“We estimate repealing all the green energy tax credits associated with the Inflation Reduction Act (IRA) would raise $851 billion over the 2025 to 2034 budget window,” wrote the organization.
A fourth option proposed by the Tax Foundation, just shy of full repeal, would also potentially raise $746 billion across a budget window from 2025 to 2034.
If the IRA is left intact, costs from this Green New Deal-lite legislation are expected to balloon to between $2.04 trillion and $4.67 trillion by 2050, according to new analysis from the Cato Institute. The Congressional Budget Office (CBO) originally claimed the IRA’s green subsidies would cost $370 billion.
As Independent Women Center for Energy and Conservation Visiting Fellow Paige Lambermont recently noted:
The IRA is far more costly than advertised when it became law, and the market distortions that it creates are just as harmful as the spending. Congress should make repealing the energy-related subsidies an important focus.
There have been different cost estimates for the price tag on an extension of expiring tax cuts, particularly those that drive growth, which tend to be for corporations and small businesses. As Cato economists find, “Repealing two of the IRA’s open-ended tax credits could more than offset the revenue loss from cutting the corporate tax rate to 15 percent, restoring R&D expensing, fixing the interest deduction limit, and enacting full expensing.”
New polling from Independent Women found that 79% of respondents—namely women, independents, and Democrats—want to see the 119th Congress extend Trump-era tax cuts.
Independent Women Center for Economic Opportunity Director Patrice Onwuka said, “Women, Gen Z, and independents are powerful demographic groups that shaped the 2024 election cycle. Our polling indicates their strong support for the tax cuts, which will be a surprise to many lawmakers but not to our organization, which speaks to women and young people every day. They want help dealing with the current affordability crisis. Allowing the tax cuts to expire will make tough financial situations worse for many women, young adults, and households.”
If tax cuts aren’t made permanent by the end of this year, the average American taxpayer is expected to face a 22% tax hike, while over 62% of tax filers could experience tax increases next year.
Our Center for Energy and Conservation supports repealing IRA green subsidies as they artificially prop up unprofitable clean energy projects, namely unreliable solar and wind, that can’t credibly compete in the free market. Perpetuating IRA green subsidies equally undermines President Trump’s energy dominance agenda that prioritizes reliable, abundant, and safe energy sources like coal, nuclear, and oil and gas. Congressional Republicans would be wise not to salvage it.
Pairing IRA repeal with making TJCA tax cuts permanent is smart policy and a welcome reprieve for American taxpayers desiring economic relief.
well written, thank you. As a purely personal observation, a message that I believe is lost in the trade-off you suggest is, who benefits? Tax cuts benefit all, subsidies benefit a few. Given the obvious pain that will become the tariffs, that pain can be offset by putting more money into everyone's pockets.