IRA’s Future Unsure as GOP Eyes Megabill Financing
TL/DR –
The Inflation Reduction Act, which is anticipated to cost taxpayers between $780 billion and $2 trillion over its initial decade, is expected to face cuts as the Republican-controlled Congress strives to reduce spending by $2 trillion. Some provisions of the Act, however, have gained support from Republican lawmakers, likely leading to disagreements over cuts in the budget reconciliation process. Despite certain provisions potentially being targeted, Ryan Abraham of Ernst & Young’s Washington Council advisory practice noted that House Ways and Means Committee Chairman Jason Smith is aware that pushing too far could lead to opposition from members who support the Act.
Summary:
The 2022 Inflation Reduction Act, estimated to cost taxpayers between $780 billion and $2 trillion over 10 years, faces potential cuts as the Republican-controlled Congress aims to cut spending by $2 trillion. However, certain provisions of the act are popular among Republican lawmakers, indicating potential disagreements in the budget reconciliation process.
Chairman Jason Smith and the Ways and Means Republicans have identified the IRA as an area for potential revenue. However, the IRA’s merits, such as job creation, economic investment, and American energy liberation, are acknowledged by numerous lawmakers.
Details:
Abraham refers to the May 1 letter sent by 26 House Republicans to Chairman Smith, advocating for the retention of the IRA’s 45U, 45Y, and 48E tax credits. The letter supports nuclear power and urges federal investment in existing nuclear energy while promoting next-generation nuclear power technologies.
The 45U credit is the IRA’s zero-emission nuclear power production credit, while 48E and 45Y are technology-neutral credits, targeted in legislation introduced by Rep. Julie Fedorchak, R-N.D. Abraham mentioned potential concern over direct pay and transferability, but noted Chairman Smith’s awareness of possible backlash from the 26 signatories.
Electric vehicle-related IRA credits remain possible targets. Abraham noted that Smith might attempt to appease members by including policies they wish to protect or incorporate, such as a more generous state and local tax (SALT) deduction cap. In March, 21 Republicans sent Smith a letter asking for targeted changes to the IRA, which was echoed by 18 Republican lawmakers in an August letter to Speaker Mike Johnson, R-La.
Trump’s Role:
Harry Godfrey mentioned President Trump’s budget proposal, which severely cut the Department of Energy and Infrastructure Investment and Jobs Act. He expressed disappointment at these cuts, as they undermine bipartisan efforts towards improving American infrastructure. Godfrey believes Congress negotiations might change the budget and remains cautiously optimistic.
Godfrey emphasized the importance of the credits included in the IRA to achieving U.S. energy dominance, a priority of Trump, and warned against undermining this mission. He highlighted that the billions in investments and job opportunities are primarily benefiting Republican districts, as acknowledged in the letters from Republican lawmakers.
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