Travis Fisher, Adam N. Michel , and Joshua Loucks
In 2022, President Joe Biden and congressional Democrats passed the Inflation Reduction Act (IRA)—one of the most brazen political projects in recent memory, designed to remake the American energy sector. As Congress faces tough negotiations over how to bring the American people a “big, beautiful” budget reconciliation bill that is also fiscally responsible, we urge lawmakers to listen to the libertarians and conservatives who champion full repeal of the IRA.
Political Pressure to Purge the IRA
Not a single Republican in Congress supported the IRA, recognizing it as the linchpin of the partisan Green New Deal rather than an “unprecedented investment.” Despite evidence before the election that 18 House Republicans had warmed up to the idea of harvesting subsidies under the IRA, all but four Republican House members voted to repeal the vast majority of the IRA in the Limit, Save, Grow Act of 2023 (the four “no” votes were in opposition to raising the debt ceiling, not to IRA repeal), and President Trump was elected under a platform that included, as he put it, ending the “Green New Scam.”
A recent coalition letter led by the Competitive Enterprise Institute and signed by more than 50 other organizations argues that full repeal of the IRA is necessary as “Congress needs to put the interests of the American people over the interests of wealthy special interests who are trying to keep their handouts flowing at the expense of taxpayers.” They argue that failure to repeal the entire IRA would be tantamount to the failure of one of President Trump’s and the Republicans’ signature campaign promises.
We wholeheartedly support the intent of the letter, which is to ensure Republicans in Congress deliver deep cuts—ideally full repeal—of the costly IRA. A key point the letter only touches on briefly is that IRA repeal could also be the centerpiece of a fiscally responsible reconciliation bill that extends Trump’s first-term tax cuts. In addition to all the other reasons to cut energy subsidies, the IRA is a massive source of spending that could be used to offset tax cuts.
The Paid-for Path to Extending TCJA
The key legislative accomplishment of the first Trump administration was the Tax Cuts and Jobs Act (TCJA) of 2017. It cut taxes for Americans at every income level and boosted the US economy. Trump campaigned on extending these expiring tax cuts to prevent a massive tax increase on nearly every American.
Republicans have made clear that TCJA extension is a top priority in 2025. However, there is one major barrier to its passage—cutting taxes without reducing spending will increase the budget deficit. Full extension will cost nearly $5.5 trillion over the next ten years, and many Republicans have said that these extensions need to be deficit neutral—meaning the tax cuts need to be paired with spending cuts or similar reforms.
This is where the IRA fits in. The IRA was initially touted as a deficit-neutral bill, with its ten-year energy and climate-related provisions projected to cost about $370 billion, offset with tax increases. However, in an upcoming Cato policy analysis, Travis Fisher and Joshua Loucks estimate that the IRA will cost between $936 billion and $1.97 trillion over the next ten years and up to $4.67 trillion by 2050 (and perhaps even more in later years because the subsidies are uncapped). A fiscally responsible reconciliation package is more likely if Congress can repeal these IRA subsidies.
More Than a Fiscal Problem
The IRA is not just a fiscal burden. It is a down payment on the Green New Deal, designed to push the US away from reliable, affordable energy sources under the guise of fighting climate change.
The IRA’s energy subsidies:
- Enable aggressive regulatory mandates, distort energy markets, and undermine grid reliability.
- Complicate and cause political fissures in what should be straightforward efforts to expand energy infrastructure across the country.
- Deepen the crony capitalism in the energy industry by enriching well-connected special interest groups at the expense of taxpayers.
Repealing the IRA will protect taxpayers from open-ended energy subsidies that siphon off their hard-earned income, redistributing it to large, politically connected corporations.
Conclusion
The challenges of drafting a reconciliation bill should not deter Republican leadership from keeping their promises to voters and upholding their unanimous opposition to the IRA when it was passed on a party-line vote. The IRA is a cornerstone of big government economic planning and is wreaking havoc on the energy sector and taxpayers alike. Congress should reject the left’s Green New Deal in favor of simpler, lower, and fairer taxes for all Americans.
