WASHINGTON (TNND) — A new report from the Cato Institute is raising alarms over the potential financial burden of the Inflation Reduction Act (IRA), suggesting it could cost taxpayers between $936 billion and $1.97 trillion over the next decade, and as much as $4.67 trillion by 2050. This estimate starkly contrasts with the initial $370 billion cost projected by Democrats when the act was passed in 2022.
According to reporting from the WSJ and Goldman Sachs:
By Goldman’s estimate, the IRA tax credits will cost tens to hundreds of billions more than CBO estimated over 10 years.
The Cato Institute’s analysis highlights that many of the act’s subsidies for clean energy projects, electric vehicles, and other climate initiatives are uncapped, meaning there is no official limit to government spending if demand for these incentives continues to grow.
Beyond financial concerns, the report argues that the IRA’s energy subsidies could “enable aggressive regulatory mandates, distort energy markets, and undermine grid reliability.” The institute also warns that the act may encourage crony capitalism by funneling taxpayer dollars to politically well-connected corporations.
Calls to repeal the IRA are gaining momentum, with the Cato Institute’s findings fueling the debate. According to the Brookings Institute, the IRA was passed under a Budget Resolution, allowing for a simple majority vote in both the House and Senate to repeal it, without the possibility of a filibuster.
However, repealing the act could have significant implications for employment. The Brookings Institute estimates that the IRA could create approximately 848,728 jobs annually across various industries. Since the law’s enactment, there has been a 14% increase in clean energy workers, totaling 3.5 million. A repeal could potentially impact these jobs.
Since some parts of the IRA enjoy bipartisan support, lawmakers may consider a partial repeal instead of a full one.
“In August 2024, 18 Republican House Representatives signed a letter to Speaker Mike Johnson (R-LA) that asked for the IRA’s energy tax credits to be “spared” from attempts to repeal the IRA. A Senior Tax Policy Advisor on the Senate Finance Committee also noted that a full repeal of clean energy tax incentives is unlikely regardless of the election results, as some parts of the IRA received bipartisan support before its enactment, which was expected to continue,” the Brookings Institute stated in the report.
