Adam N. Michel
Adam N. Michel and Joshua Loucks

When Congress passed the Inflation Reduction Act (IRA), it was told the new energy tax credits would cost about $270 billion over a decade. Revised official estimates put the cost at multiple times that amount, as much as $786 billion. But congressional scorekeepers may still be getting the long-term cost of the IRA energy subsidies wrong, and fixing this mistake is key to unlocking permanent pro-growth tax cuts.
A new Cato report by Travis Fisher and Joshua Loucks (one of the authors here) argues that two of the most expensive IRA tax credits could be functionally unlimited subsidies, costing as much as $180 billion annually by 2050. With no expiration in sight, the total cost of the IRA green energy subsidies could accumulate to as much as $4.7 trillion by the middle of the century.
These infinite tax credits can offset permanent extensions to the most pro-growth features of the Tax Cuts and Jobs Act of 2017, which largely expires at the end of the year. Without bending long-standing budget rules, Congress must ensure that any permanent tax cuts outside the 10-year budget window are offset with spending cuts or higher revenue. This rule is why tax cuts are often temporary.
Repealing two of the IRA’s open-ended tax credits could more than offset the revenue loss from cutting the corporate tax rate to 15 percent, restoring R&D expensing, fixing the interest deduction limit, and enacting full expensing.
Budget Scorekeepers Blew It; Fixing Their Mistake Is Critical
The Joint Committee on Taxation (JCT) badly underestimated the cost of the IRA energy tax subsidies. It has since revised many of the original estimates to more accurately reflect the consensus estimates that put the 10-year cost of the IRA at roughly $1 trillion. Government scorekeepers are very likely still not fully incorporating the long-run,  » Read More
https://www.cato.org/blog/repealing-just-two-tax-credits-could-cement-permanent-pro-growth-tax-cuts