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At least eight Republican congressmen expressed their support for maintaining the tax credits created by the Inflation Reduction Act of 2022. Among the many changes to U.S. energy policy in the early days of the second Trump administration, one that has been highly anticipated by the renewable energy industry is the potential cuts to tax credits created by the Inflation Reduction Act (IRA) of 2022. The IRA includes tax credits for the installation of renewable energy projects such as solar and energy storage of all sizes, from a rooftop installation to a large utility-scale solar installation. It also offers tax credits to U.S. manufacturers of clean energy components such as solar modules, electric vehicle batteries and others. According to the U.S. Treasury and Rhodium Group, more than $380 billion in private investments have been announced since the IRA was passed, indicating its success as an economic driver. These investments include $114 billion for solar energy, $77 billion for battery manufacturing, and $66 billion for energy storage. According to the Treasury Department, these investments are expected to sustain 1.5 million jobs over the next decade, based on an analysis by the Labor Energy Partnership. An economic activity tracker provided by E2 shows the impact in each state. The Trump administration is expected to make cuts to IRA tax credits, and while analysts say a complete repeal is unlikely since it needs congressional support, it seems likely that key provisions will be eliminated in the upcoming budget reconciliation process. In testimony before the House Ways and Means Committee, Rep. Kim Young of California advised Congress to “use a scalpel, not a sledgehammer, when thinking about which tax credits to repeal.” It remains unclear whether the scalpel or the sledgehammer will be used, but the strong economic benefits of IRAs in Republican districts may safeguard the credits of a sledgehammer approach. Analyst E2 tracks IRA funding and notes that about $110 billion worth of investments have been announced in Republican districts, creating about 83,000 jobs. This figure dwarfs investment in Democratic districts, with about $19 billion in investments resulting in about 28,000 jobs. The IRA was designed this way, partly to ensure job creation in districts that have historically relied on fossil fuel production for economic growth, and partly so that the benefits in Republican districts would make repealing the law unattractive. This approach appears to have had some success. Last August, eighteen members of the U.S. House of Representatives asked Congress to withhold IRA funds. A full repeal would create a worst-case scenario, in which we would have spent billions of taxpayer dollars and received almost nothing in return, said a letter to House Speaker Mike Johnson. Now, at least eight more Republican House members have expressed support for maintaining IRA tax credits, citing job growth. Heres what House Republicans are saying in official testimony to the Ways and Means Committee: “I am urging caution in addressing the IRA provisions that have incentivized the offshoring of the future of auto jobs, which brought billions of dollars in investment to the U.S. and thousands of jobs created right here,” said Rep. John James, Mich. “While most of the IRA is harmful policy, we must not neglect the industry-wide energy tax provisions that manufacturers and job creators in my district rely on. We risk losing too many American jobs.” Representative Marinette Miller-Meeks of Iowa highlighted five tax credits she described as “drivers of transformative investments in American energy.” She recommended retaining the Clean Fuels Production Credit (45Z), the Advanced Manufacturing Production Credit (45X), the Carbon Sequestration Credit (45Q), as well as the Clean Energy Production Tax Credit (45Y) and the Investment Tax Credit (48E). I believe changes should be targeted and balanced, not sweeping repeals that would jeopardize our economic and security gains, said Rep. Miller-Meeks. “I urge caution in addressing provisions that have incentivized the offshoring of technology and manufacturing, resulting in billions of dollars in American investment and thousands of jobs both in my district and across the country,” said Rep. Erin Houchin. “Reversing these incentives could have serious economic consequences if not addressed prudently.” |
