As Republican lawmakers debate how to finance the extension of President Donald Trump’s tax cuts, fiscal and energy policy organizations are urging them to eliminate costly green energy subsidies.
House Republicans have struggled to offset the $4.5 trillion budget resolution needed to extend the 2017 Tax Cuts and Jobs Act for another decade. Their initial plan proposed raising the debt ceiling by $4 trillion, cutting $2 trillion in federal spending, and assuming $2.6 trillion in economic growth. However, Senate Republicans are skeptical about achieving $2 trillion in cuts without touching Medicaid or SNAP.
Some GOP leaders are considering using a “current policy” baseline instead of the traditional “current law” baseline to make the tax cuts appear cost-neutral. Critics warn this accounting method could massively increase the national debt.
Instead, many fiscal and tax policy groups are pushing Congress to cut green energy tax credits from the Inflation Reduction Act (IRA). Initially projected to be deficit-neutral, the IRA’s subsidies are now estimated to cost between $2 trillion and $4.6 trillion by 2050, according to the Cato Institute.
If Congress repeals just the production and investment tax credits, the federal government could save $130 billion annually by 2034. Other suggested cuts include eliminating $15 billion per year in electric vehicle tax credits and $8.5 billion per year in carbon sequestration subsidies.
If Senate parliamentarian Elizabeth MacDonough approves the use of the current policy baseline, lawmakers may not need to find as many budget offsets and could focus solely on making Trump’s tax cuts permanent. Republicans aim to pass a reconciliation package by Memorial Day.
