Fueling The Conversation, Week of May 26th, 2025
Since the election of President Trump and the Republican-majority Congress, we’ve been stressing the benefits of repealing the Inflation Reduction Act’s (IRA) green energy tax credits as part of the “big beautiful” reconciliation bill..
As I argued recently in a Washington Times op-ed, “Republicans should start with the low-hanging fruit by slashing corporate subsidies. This move checks all the boxes. Subsidies distort markets by propping up politically favored firms, often at the expense of more innovative or efficient competitors. … It’s a rare policy that aligns Mr. Trump’s promises with political and fiscal reality.”
Last week, House Republicans recognized this reality by passing their new tax and spending bill, the One Big Beautiful Bill Act. In contrast to previous iterations of the bill, which included lengthy phase outs for the so-called clean electricity production and investment tax credits, the new version phases out these credits by 2028 and includes a construction-start deadline that prevents any companies that haven’t started construction in 60 days after the bill’s enactment from receiving them. While falling short of a full and immediate repeal of the subsidies, the fact that these provisions sunset before the end of President Trump’s term is meaningful because it makes them harder to revive.
This result was far from certain at the beginning of the reconciliation debate. Despite there being a strong argument for immediately removing the tax credits, “scalpel” Republicans advocated for a long phase down because they wanted to maintain the stream of funding that was benefiting projects in their districts. Another reason is that history shows the idea of phaseouts is simply a fallacy. Politically, it means that these “scalpel” Republicans could have it both ways – voting to phase out the subsidies, but knowing they can easily be revived with a change in the administration or the makeup of Congress. However, when push came to shove, all of these Republicans (with the exception of New York Representative Andrew Garbarino, who did not vote) supported the measure.
Staying in line with President Trump’s promised agenda is the optimal way to ensure that Republicans achieve the goals that they campaigned on. This couldn’t be more true for energy policy; the Trump administration has taken significant steps towards pursuing energy abundance through deregulatory actions and executive orders, but lasting reform requires congressional action to solidify these gains. While rocky at first, it’s a positive sign that House Republicans have recognized the importance of maintaining a united front. Now the success of the One Big Beautiful Bill Act now depends on the Senate, where its prospects of success remain uncertain. According to Politico, Senate Republicans are vowing to make changes to the bill, which could include preserving more of the tax credits or extending the phaseout period. They shouldn’t.
Any further preservation of the IRA’s tax credits should be rejected by Republicans as a wasteful and counterproductive use of taxpayer dollars. Fortunately, any senator that proposes keeping more of the tax credits will be counteracted by fiscal hawks who want to see even more cuts in the bill, making this change unlikely.
Time is of the essence if Republicans want to keep to their July 4 goal for getting the bill to President Trump’s desk. The Senate shouldn’t prevent this from occurring by squabbling over the IRA’s tax credits. As we’ve seen from the House, when push comes to shove, getting the bill passed is far more important.
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Fueling the Conversation, a weekly column by IER President Tom Pyle, offers a principled take on energy events. Energy underpins all aspects of modern life, so policies that artificially limit production hurt everyday people paying to heat their homes and driving to work. “Green” groups push these policies for idealogical reasons, but this column uses economic logic and hard facts to advocate for energy freedom.
