Could cutting Biden-era subsidies for clean energy cost the GOP its majority in the Senate?
That’s the argument some Republicans are making, and they point to the potential of consumer electricity rate hikes in red states as a reason.
President Trump’s tax reform proposal would eliminate certain tax credits for renewable energy that were included in President Joe Biden’s Inflation Reduction Act (IRA).They include credits for generating power from wind and solar, hydrogen power, and advanced manufacturing, as well as support for nuclear and geothermal energy.
In its version of the bill, the House of Representatives took a hard line and nixed virtually all of these tax credits.
The Senate Finance Committee, however, took a different approach. Its proposal, released earlier this week, phases out solar and wind energy tax credits by 2028 and nixes support for hydrogen projects not commenced by 2026. However, it extends 100 percent of the tax incentives for hydropower, nuclear and geothermal until 2033.
Fiscal hawks in the House, like Freedom Caucus Republican Chip Roy of Texas, denounced the plan. “Yeah, I will not vote for this,” he tweeted.
Supporters said that, while federal spending is too high, the political price could be losing the GOP majority in the Senate.
Supporters of extending the credits — or a more gradual phaseout — point to a study from NERA Economic Consulting released by the Clean Energy Buyers Associated, which found that consumers in Iowa, Kansas, Maine and Nebraska could see a more than 5 percent spike in their electricity bills if tax credits for clean energy are cut as the House proposes.
According to NERA, Arizona, North Carolina, South Carolina, Kansas and Ohio would see household electric rates increase by anywhere from 11.5 percent to 14.3 percent and lose between 3,000 and 6,700 jobs each.
A separate study by Brattle found the same thing: Repealing the tax credits would spike consumer electricity prices in Great Plains states and North Carolina.
And what do Iowa, Maine and North Carolina have in common? Potentially vulnerable Republican senators running for re-election in 2026 who do not want to be dragged down by electricity bill inflation.
Tax credit supporters include Trump’s first-term energy secretary, Dan Brouillette.
“While it may be sensible to phase out credits during a carefully planned transition period, it is not good policy to make abrupt changes that stifle investment and create uncertainty,” Brouillette recently wrote. “With so much at stake right now, it is crucial that we do not eliminate the policies that support actual U.S. energy production and keep energy costs low.”
Conservative fiscal groups disagree.
“Repealing the IRA subsidies is the pro-consumer decision,” said Daren Bakst, the director of the Center for Energy and Environment at the Competitive Enterprise Institute. “The only thing that will cost Senate Republicans is to go against conservative principles and to assume Americans don’t remember that they promised to kill off the Green New Deal.”
Republican insiders agree that, in a perfect world, these credits never would have been created. However, with a narrow GOP majority, wiping them out will create political consequences that party leaders have to face.
“Right now, the only winners (from the Trump bill) are in New York and California, getting a huge tax break,” one GOP strategist said. “All to try and hold onto the majority. Well, if that’s the game, why are we putting states like Maine and Iowa at risk?”
In Maine, members of the state’s solar and energy storage industry are asking Sen. Susan Collins to oppose ending the tax credits.
“We realize that Congress has an important obligation to cut spending to balance the budget and reduce taxes,” 70 industry representatives wrote in a letter to Collins. “However, cutting solar tax credits would be counterproductive.”
Collins has stated that Sen. Mike Crapo, R-Idaho, the main author of the Senate Finance Committee proposal, did not fully take her concerns into account when drafting it.
Kansas Sen. Jerry Moran, R-Kan., is also thought to have an issue with the plan. He co-signed a letter with Republican senators Lisa Murkowski of Alaska, Thom Tillis of North Carolina and John Curtis of Utah arguing for a more gradual phaseout of clean energy tax credits.
Even Republican Sen. Shelley Moore Capito, from ultra-Trumpy West Virginia, could have a problem with the bill. It would wind down the hydrogen tax credit before ground is formally broken on the Appalachian Regional Clean Hydrogen Hub.
