Republican Plan to Ax Biden’s Green Tax Credits Is Self-Sabotage

In Washington, budgets are less like balancing a checkbook and more about signaling priorities. House Republicans are now signaling they plan to gut a substantial part of the Inflation Reduction Act’s clean energy tax credits—including those for electric vehicles, wind, solar, hydrogen, and even home efficiency upgrades.

Short-term fiscal theater might make the spending bill easier to pass, but the long-term cost in competitiveness, energy security, and missed opportunity would be far greater than any line-item savings.

The cuts aim to offset the extension of Trump-era tax cuts that chiefly benefit the wealthy. But these energy tax credits aren’t mere climate policy—they were an industrial strategy, fueling a nationwide boom in manufacturing, construction, and job creation.

Ending these credits would barely hold down the bottom-line cost of the tax package, which would add $3.7 trillion to the deficit over a decade. The functional effect of the cuts won’t be its de minimis deficit reduction; it would be industrial disarmament. Their repeal would undercut supply chains, strand capital, and stall job growth in red and blue states.

Most tax credits are like performance-based tax expenditures that pay out only if a company builds something, hires workers, or deploys clean energy technology—not blank checks.

Unlike the individual and corporate tax breaks that Congress is rushing to extend, these credits were conditional on productive behavior. In policy terms, that’s a rare synergy between fiscal cost and economic payoff.

Red states have been among the biggest winners in the recent green industrial boom. Georgia, South Carolina, and Tennessee have seen an influx of new battery, solar, EV, and hydrogen manufacturing initiatives—many backed by billions in private investment enabled by federal tax credits. These are job-heavy facilities in counties that voted for Trump by double digits.

Now, many of those projects would face a new risk: policy instability. The proposed repeal wouldn’t just stall future developments and chill prospective investments—it would threaten to pull the rug out from projects already underway. Companies that based siting decisions on long-term tax incentive models may have to downsize or jettison plans entirely.

Even if the repeal doesn’t kill existing projects outright, it would send a destabilizing message: “America’s industrial strategy, especially when it comes to clean energy, is now subject to the next electoral cycle—govern yourself accordingly.” Lawmakers in red-state districts who have cut ribbons in front of factories using giant oversized scissors soon would have to explain why those factories are shuttered, jobs are drying up, and capital is flowing elsewhere.

One of the 2022 tax-and-climate measure’s better policy design features was that it tethered energy tax incentives to emissions goals. For instance, the New Clean Electricity Production Tax Credit was set to phase out the later of 2032 or when the electric power sector reduces its emissions 75% from 2022 levels. This injected predictability into the tax credit system.

The GOP’s gutting would trash that certainty—not just for these tax credits, but for future incentives as well. This kind of policy volatility is poison to capital-intensive industries.

Developers would be disinclined to break ground on multibillion-dollar projects when they can’t predict whether their business model, reliant on tax credits, would survive the next election cycle. The downstream effects on innovation, competition, energy costs, and security would compound over time—and these changes aren’t easily reversible.

Reinstating the credits down the road, even under a different administration and Congress, won’t magically erase investor memories of being left out to dry in 2025.

Once trust in US tax credit durability between administrations is broken, it doesn’t come back with a press release and Rose Garden announcement. Capital would retreat to where the ground is more stable—the European Union, China, or anywhere that offers more long-term clarity.

While Congress is squabbling over repealing energy incentives to bankroll tax cuts, America’s competitors would be running up the score. Europe has committed to long-term green industrial policy through the European Union Green Deal and Net-Zero Industry Act. Even China is committing state-backed financing to batteries, EVs, solar panels, and minerals—dominating global supply chains and the future direction of innovation.

The tax-and-climate law was the US response to global competition in the green energy space—a market-incentivizing strategy that began to level the playing field and gave investors reason to build here.

Despite being late to the game, it worked. Domestic clean energy manufacturing surged, American-made EVs gained traction, and the US was exporting technology, not just importing it. Undoing it all now stalls progress and signals surrender.

Engaging in a trade war with China with one breath and destabilizing domestic supply chains in the next has some irony. It’s akin to bitterly complaining about dependency on competitor products while merrily bulldozing your own factory.

The US spent decades negligently falling behind in clean tech, and the 2022 law was our attempt to catch up. This repeal is an open invitation for others to lap us—again. We may not get another chance.

Andrew Leahey is a tax and technology attorney, principal at Hunter Creek Consulting, and practice professor at Drexel Kline School of Law. Follow him on Mastodon at @andrew@esq.social

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