House subcommittees question IRA energy tax credits, budget impact and grid risks

A joint hearing of the Subcommittee on Economic Growth, Energy Policy, and Regulatory Affairs and the Subcommittee on Health Care and Financial Services examined the budgetary and reliability consequences of energy tax credits in the Inflation Reduction Act, lawmakers and witnesses said.

Lawmakers said the scale and design of the IRA's energy incentives have produced large, unexpected federal costs and distorted energy markets. "Subsidies beget subsidies," said Ben Lieberman, Senior Fellow at the Competitive Enterprise Institute, arguing the law funnels support to projects that would not compete without federal aid.

The panel heard multiple estimates showing the cost of IRA energy credits has risen well above initial scores. William McBride, chief economist at the Tax Foundation, testified that early scores from the Joint Committee on Taxation underestimated later uptake and that changing Treasury guidance and rulemaking expanded access to the credits. McBride said updated tax-expenditure estimates put the cost of credits at about $1.2 trillion over the next decade and cited outside studies that place a broader range between roughly $900 billion and $2 trillion over 10 years.

Witnesses and members pointed to several causes for the gap: uncapped credit structures, bonus eligibility rules, the availability of direct pay or transferability, and regulatory interactions (for example, fuel economy or tailpipe rules) that increase demand for subsidized technologies. "Some of the provisions are virtually uncapped," Lieberman said, describing clean electricity credits for wind and solar that do not sunset until long-term emissions targets are met.

Grid reliability concerns were raised by witnesses who cited sector assessments. Lieberman and others referenced warnings from the North American Electric Reliability Corporation about periods of low wind and solar output and the resulting volatility in summer reliability. "We are trying to put more of our eggs in one basket while switching to a flimsier basket," Lieberman said, warning that reliance on intermittent resources increases the need for costly backup and transmission investments.

Members also debated who benefits from the credits. McBride cited analyses showing a substantial share of credits accrue to higher-income households and large corporations, and he said the largest business credits flowed to the biggest firms and their shareholders. "A lot of the credits go to businesses," McBride testified, "and the shareholders of those companies tend to be high‑income people."

The hearing produced no formal vote or committee action. Members asked witnesses for additional documents and analysis, and the chair granted members five legislative days to submit materials for the record.

Committee activity is expected to continue: members on both sides signaled further oversight and possible legislative responses to address cost estimates, eligibility rules, and grid reliability risks.