While top Republican lawmakers discuss how to offset the cost of extending President Donald Trump’s tax cuts, dozens of fiscal and energy policy organizations are telling them to start with cutting green energy subsidies.
House Republicans have been struggling for months over how to finance their $4.5 trillion budget resolution that would extend the 2017 Tax Cuts and Jobs Act for the next 10 years.
To partially offset their proposed budget resolution, House Republicans planned to raise the debt ceiling by $4 trillion, cut $2 trillion in other federal spending, and assume that the extension will add $2.6 trillion in economic growth.
But many in the party, especially those in the Senate, believe that making $2 trillion in cuts that leave Medicaid and SNAP untouched simply isn’t doable. As a result, GOP leaders are considering using the “current policy” baseline rather than the traditional “current law” baseline when calculating the budget resolution’s deficit impact.
This would make the tax portion of the House’s $4.5 trillion budget resolution, in theory, cost zero dollars rather than trillions. But nearly all tax and budget organizations are calling this a “gimmick” that would explode the national debt.
Instead, organizations are advocating that lawmakers stick with the 10-year extension and focus on finding the trillions in offsetting cuts in unconventional places, such as the 2022 Inflation Reduction Act.
Dozens of budget, tax, and energy organizations urged lawmakers to repeal all green energy tax credits created by the IRA, originally advertised as deficit neutral but more recently estimated to cost trillions over the next few decades.
In a March report analyzing the impacts of repealing the IRA, the Cato Institute revealed that the IRA’s uncapped tax credits for renewable energy and greenhouse gas reduction projects will cost between $2 trillion and $4.6 trillion by 2050.
If Congress uses the reconciliation process to repeal only the production tax credit and the investment tax credit, the federal government could save $130 billion per year by 2034.
“IRA repeal could also be the centerpiece of a fiscally responsible reconciliation bill that extends Trump’s first-term tax cuts,” Cato summarized. “[The] IRA is a massive source of spending that could be used to offset tax cuts.”
Other green energy-related cuts that would help offset the House’s $4.5 trillion budget resolution include $15 billion per year from electric vehicle tax credits, $8.5 billion per year from carbon oxide sequestration tax credits, and billions more in similar subsidies.
But if lawmakers receive the green light from Senate parliamentarian Elizabeth MacDonough to use current policy baseline, they will no longer have to find as many offsets and will likely pursue making the tax cuts permanent.
Republicans are hoping to get a completed reconciliation package to Trump’s desk by Memorial Day.
