How Cuts To The Inflation Reduction Act Will Hurt Everyday Americans

Last Updated on: 5th June 2025, 02:26 pm

If the Republican-dominated House of Representatives has its way, the Inflation Reduction Act will die a slow and impactful death. Cuts to the Inflation Reduction Act will take the wind out of the Biden–Harris administration’s clean energy plans, as popular programs like incentives for solar panels and electric vehicles will be eliminated.

Some — but not all — Senators are eager to fully repeal the IRA, because to do so would reportedly reduce the GDP by $1.1 trillion. It would also please the self-anointed King of the United States, who is tied to Big Oil and the financial endorsements of oil companies and oil billionaires.

There are a number of consequences to canceling the Act: slowing the transition to a less polluted nation, killing investments in factories and reducing future investments, reducing current and future green jobs, and raising consumer energy bills will be by-products of the IRA’s loss.

Cuts to the Inflation Reduction Act will diminish many current investments in manufacturing, and a lot of those investments have been located in red states where labor and land costs tend to be cheaper. The amount of total investments has been substantial: $321 billion in new private investment across 2,369 domestic clean-energy facilities, representing 4.7% of all US private investment in the first quarter of 2025. An additional $522 billion of outstanding investment is in jeopardy: 2,217 facilities, with 680,000 operational and construction jobs.

The Rhodium Group outlines how an “often-stated goal of these changes is to bring costs down for American households. We find that repealing the energy tax credits has the opposite effect, increasing household energy costs by $95-290 in 2035—a 2-7% increase in costs that year.”

Jobs and investment: The IRA has sparked more than 400,000 new jobs and $600 billion of private investment in clean energy. Repealing it, says Energy Innovation, will force consumers to pay more for energy and will cost US jobs. Doing so will:

• increase cumulative household energy costs by $32 billion from 2025–2035;
• cost America nearly 790,000 jobs in 2030 and more than 700,000 jobs in 2035;
• decrease GDP more than $160 billion in 2030 and nearly $190 billion in 2035; and,
• increase climate pollution by more than 530 million metric tons of carbon dioxide equivalent in 2035, equal to adding 116 million cars to the road.

Households and clean energy: The Residential Clean Energy Credit currently gives households a federal tax break worth 30% of the price of installing solar panels, batteries, geothermal heat pumps, and other energy-producing and energy-saving systems. Its value is uncapped, but in 2023, the more than 1.2 million US families who claimed the credit received an average of roughly $5,000. These upgrades more than pay for themselves over the appliance’s lifetime, according to Rewiring America.

Clean energy production: Clean electricity production and investment tax credits will be eliminated as early as 2026. Moreover, highly restrictive and administratively complex limits on sourcing of components, subcomponents, and critical materials used at a facility will accompany the loss. Both red and blue states are currently struggling to meet the energy needs of their citizens.

Solar: The House bill as it is eliminates a 30% federal tax credit for residential solar systems at the end of the year. Solar array renters will see their premiums jump as companies lose their tax credit for leasing systems to homeowners. Shares of Sunrun Inc., America’s biggest rooftop-solar company, fell as much as 42% on May 22 — the most ever in intraday trading, according to Bloomberg. Equipment provider SolarEdge Technologies Inc. slid as much as 27%. NextEra Energy Inc., the biggest US developer of wind and solar projects, slid as much as 10.7%, the most since October 2023.

Heat pumps: Replacing an oil hot water heater with a high-efficiency electric heat pump through a $2,000 federal tax credit for the devices won’t be available after the end of the 2025.

Electric vehicles: The $7,500 federal tax rebate for new electric vehicle purchases no longer would have an end date of 2032 — it would end in December 2025. And there’s pain for those of us who already own an EV: the House bill adds a $250 charge to registration fees for electric vehicles and a similar $100 charge to registration of hybrid vehicles. Supposedly, this value tax assuages lost gasoline tax revenue for non-internal combustion engine vehicles (ICEVs).

“Notably, updates to the Inflation Reduction Act more than doubled the amount of owners who indicated they received a federal tax credit/rebate,” JD Power wrote, “and more than half of BEV buyers cited tax credits as a reason for purchasing their vehicle, which is among the most influential purchase drivers.”

Emissions: And the repercussions of cuts to the Inflation Reduction Act go deeper than just financial considerations. Emissions could increase anywhere between at least 500 million metric tons and more than a gigaton in 2035.

Carbon capture: Cuts to the Inflation Reduction Act actually will have one good consequence. Eliminating $3.7 billion in funding previously earmarked by the Department of Energy (DOE) for carbon capture and storage (CCS), hydrogen fuels, synthetic fuels, and a variety of other industrial decarbonization technologies is the right move, albeit an accidental one.

Hope Springs Eternal that Cuts to the Inflation Reduction Act Won’t Be as Devastating

Not every Senator is hot to implement cuts to the Inflation Reduction Act. Several Republican senators seem to have questions about the phaseout of incentives, including for clean electricity.

Senator Thom Tillis (R-NC), who is up for reelection next year in the purple state, was one of four Senate Republicans who signed an April letter urging a targeted approach to reforming renewable energy tax incentives rather than a wholesale repeal. The letter emphasized “the importance of maintaining a stable and predictable tax framework to promote domestic energy development.” The Senators agreed that “fiscal responsibility and prudent efforts to streamline the tax code” were appropriate, they also cautioned “against the full-scale repeal of current credits, which could lead to significant disruptions for the American people and weaken our position as a global energy leader.”

The other signatories to the April letter were Senators Lisa Murkowski of Alaska, Jerry Moran of Kansas, and John Curtis of Utah.

Canary Media describes the extent of clean energy in NC: “a leader in the emerging electric vehicle supply chain, with lithium mines, Toyota’s massive battery plant in Randolph County, and EV factories all in the works.” The state has over 109,000 clean energy jobs, the ninth most in the country.

Senate Majority Leader John Thune told reporters that the Senate plans to write its own version of the bill. Nonetheless, renewable energy stocks are on a downward spiral, even as some Wall Street analysts concur that the final Senate bill isn’t likely to be as damaging to the industry as the House version would be.

“The impact to Americans is that this will make energy bills more expensive,” Sunrun Chief Executive Officer Mary Powell said in an interview. “It will slash consumers’ access to affordable, reliable solutions.”