As Republicans begin work on a budget reconciliation process where they aim to pass big tax cuts, they’re looking for ways to pay for them. Leaders have signalled that the Inflation Reduction Act tax incentives might be a target.
But a growing number of Republicans are voicing opposition to the idea, Politico reports. Twenty-one of the GOP’s house members have said it would be a mistake to revoke the tax credits and that they may withhold their support from any proposal that does so.
Before the election, I wrote that getting rid of the IRA tax breaks was unlikely. Now, as they face their biggest test, it’s clear that doing so would be a bad deal for Americans and President Trump’s stated goal of energy dominance.
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The IRA Tax Breaks Are Good for Americans, Especially Republicans
Many of the Republican Representatives speaking out in support of the IRA tax breaks represent districts that have seen incentives resulting directly from IRA policies, Politico reports. As a rule, republican districts and states have seen the vast majority of investment spurred by IRA incentives.
According to E2, an environmental and economic advocacy group, the Inflation Reduction Act has spurred just over $129.5 billion in investment. Nearly $107 billion of that has gone to Republican districts, where it’s helped create more than 81,000 jobs. States that voted for President Trump in 2024 have received more than $120 billion in investment.
Many of the tax incentives that are spurring this investment were established for 10 years, creating a predictable and stable playing field for companies eager to invest in growing America’s energy capacity and creating American jobs.
Repealing the IRA tax incentives could also hurt Americans at home, locking them into energy use that will cost them money in the long run. Inflation Reduction Act tax credits make solar panels and home batteries — which can generate thousands of dollars in savings — affordable for more people. It does the same with common sense energy efficiency improvements like insulation, heat pumps, and home energy audits. One year after the Inflation Reduction Act passed, home electrification nonprofit Rewiring America estimated the Inflation Reduction Act could send $46 billion to homeowners for energy efficient heat pumps, $135 billion for solar tax credits, and $3.4 billion in rebates for energy efficiency measures that lower energy bills.
Removing these tax incentives and rebates will limit homeowners’ choice for addressing their energy needs.
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The IRA Tax Breaks Supports American Energy Dominance
The United States is entering a period of explosive growth in demand for electricity. According to Grid Strategies, a power sector consulting firm, electricity demand could increase 15% in the next five years, five times more than was forecasted just two years earlier. Those additional 128 gigawatts of electricity, needed by AI and data centers, manufacturers, and electrification projects, have to come from somewhere.
The United States needs every available electron, and hampering the growth of an energy industry sector doesn’t make sense. Renewables are already doing the heavy lifting when it comes to meeting energy demand. In 2024, solar and battery storage accounted for 81% of new electricity generating capacity (50.7 gigawatts). In 2025, they’re expected to do the same .
Eliminating clean energy credits would cost 3.8 million jobs, raise energy costs for the average American, and limit economic growth with high electricity prices, the Brattle Group found. Renewable energy projects, which are already in development and can be deployed quicker than natural gas plants, can meet demand and reduce costs in the short term.
In a world of rising energy demand and rising energy costs, we can’t afford to move backward on policies that are addressing both issues.
Neil ChatterjeeChief Governmental Affairs OfficerNeil is Palmetto's chief governmental affairs officer and former chairman of the Federal Energy Regulatory Commission.
