Under Biden’s tax credits, the rich are getting richer

Topline: President Joe Biden’s Inflation Reduction Act expanded a tax credit program meant to incentivize homeowners to buy solar panels and other green technologies, but most of the tax breaks are going to families that can already afford the renovations.

The top 25 percent richest households in the U.S. got two-thirds of the tax credits, amounting to $5.5 billion. The bottom 25 percent got only $32 million, according to Politico’s E&E News.

Key facts: Economists told E&E News that solar panels help wealthy families save money on their electric bills, and they would likely purchase them even without the tax credits.

The credits reduced federal income tax revenue by $8.4 billion last year — $6 billion more than the Congressional Budget Office projected. $2 billion of the credits went to households with incomes above $200,000, E&E News found.

Biden has extended the program through 2031, which the CBO predicts will cost $34 billion — even as it cost $42 billion in the 16-year period from 2006 to 2021.

Another Inflation Reduction Act program targeted more specifically toward low-income families has not found any traction. It’s supposed to give rebates for buying energy-efficient equipment, but only New York and Wisconsin have started offering the rebates. Twenty-seven states haven’t even applied for funding, E&E News reported.

Search all federal, state and local government salaries and vendor spending with the AI search bot, Benjamin, at OpenTheBooks.com. 

Critical quote: “It’s a lot of money for relatively low emissions reductions,” Brookings Institution economist Sanjay Patnaik told E&E News. “It runs the risk of making climate policy less accepted by the public because people will say, ‘This is running up a big bill and is costing much more than expected.’”

University of California, Berkeley, energy economist Lucas Davis took a differing stance, arguing that the federal government should take an even stronger approach by directly taxing carbon emissions.

“I understand the political advantage of subsidies, but in terms of changing behavior and economic efficiency, the tax approach has many advantages,” Davis told E&E News. “When you tax carbon emissions directly, people look for all kinds of ways to reduce carbon emissions … Maybe I buy a bike or move closer to work or don’t take as many airline flights.”

Summary: While Climate change is one of the greatest fiscal challenges facing the government, that doesn’t give it permission to spend taxpayer money on inefficient solutions.

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