The Goldman and Brookings analyses contend that the tax credits could cost American taxpayers three times as much as the $271 billion forecast when Congress passed the law.
DB2
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I see that article as politically motivated instead of just simply and plainly honest.
Twisting ideas without real study to stir up people who refuse to spend money on the federal level. Meaning they would deny our industrial build up. A way to stop our nation for a few people who do not pay much in taxes but are gullible in the political winds. And have been gullible for decades to the corruption.
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Did you actually look at the report. It was written by authors from EPRI, the Minneapolis Fed Bank and Harvard/Berkeley. Here is a link:
Rather than “twisting ideas” it comes more under the heading of TANSTAAFL. Climate mitigation is expensive, not (as is sometimes claimed) deficit reducing. However, as noted, it depends upon whether the tax credits are used.
Economic implications of the climate provisions of the Inflation Reduction Act | Brookings.
“The problem IRA confronts is massive—re-orienting the way the U.S. and global economies produce and consume energy,” write the authors—John Bistline of the Electric Power Research Institute, Neil R. Mehrotra of the Federal Reserve Bank of Minneapolis, and Catherine Wolfram of Harvard University (on leave from the University of California-Berkeley).
They estimate the cost of the legislation could be as much as around $1 trillion, considerably higher than government estimates. But, according to the authors, even expenditures that high would be cost-effective when compared with the social cost of carbon…
But, the authors note, revenue losses from the tax provisions of the IRA could be “significantly larger” than initially estimated by the Congressional Budget Office (CBO) and Joint Committee on Taxation (JCT)…
The Electric Power Research Institute’s US-REGEN model suggests that the tax credits alone would cost $780 billion by 2031 (almost three times the CBO/JCT estimate). That’s because most of the credits are uncapped and their cost will depend on the extent to which households and firms use them.
DB2
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All of that depends on the forecasting assumptions. That is why I think it is a hit piece. The WSJ may not be fully quoting the Minn FED. Meaning there is more to it. A range of forecasting can occur in the small print when the predications are spelled out. The WSJ does not mind skipping the brighter forecast.
It is too simplistic to use the words “tax credits” because the WSJ’s readers do not like them by and large and end up disabusing the readers of in fact a better economic model.
DB2 supply side econ has been very damaging. No one ever runs on supply side econ these days. Not a mention of it. But the attitudes that got us here remain. Time to build our nation instead of misguided worries about taxes. Most of the people worried about taxes are not going to see higher taxes. In fact a better run economy can see a reduction in taxes down the income ladder.
Simplistic? Probably not, as that is what they are. For example when you buy an EV, what else is that $7500? This year the IRS tells us that “If you bought a new, qualified plug-in electric vehicle (EV) in 2022 or before, you may be eligible for a clean vehicle tax credit up to $7,500…”
From the Brookings report:
“The Congressional Budget Office (CBO), using inputs from the Joint Committee on Taxation (JCT), estimates that over two-thirds of the fiscal costs of the climate-related provisions of IRA ($271 Billion) will be tax credits, which target clean electricity production and investment, new and used electric vehicle pur- chases, and investments in clean energy and energy efficiency by individuals (Table 1 in Section 2). The remaining third of fiscal costs ($121 Billion), per CBO/JCT, will be direct expenditures on forestry and agriculture, energy loans and other financial investments, and other items. Most of the tax credits are uncapped and are a function of individual firm investment decisions and individual household consumption decisions.”
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There is a bias on one side of the aisle that does not listen to anything at all clearly unless a rich man gets a tax cut. Tax credits are a dog whistle for people who have no clue about econ. Not everyone. We all know who we are.
Yes, but whether something is expensive or not depends on how you do the accounting.
For example, not making a sufficient quantity of face masks in the US saved us money for years until we needed masks in March of 2020 and doctors and nurses were reusing them. All of a sudden we wished we had been making more of them domestically.
As for the EV tax credits at least we are requiring some raw materials and assembly in the US. On paper the credits will be an expense. But it will create tax paying jobs and provide some level of energy security that won’t immediately show up anywhere as an offset to those expenses.
Mike
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The bigger the environmental mess from fossil fuels the cheaper the alternatives really are.
Yes I think that statement is largely is correct.
But spending now could reduce future spending on the damage caused by the climate. Cleaning up the sources of air, water and soil pollution can cost trillions of dollars , an investment that doesn’t generate profits or productivity as measured in financial terms. But methinks it does improve quality of life and public health. But those improvements are not quantifiable in dollars and cents. So the benefit is ignored. But maybe it shouldn’t be.
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Off topic here, but in early 2020 3M had large warehouses stockpiled with masks. They then shipped them off to China where there was a tremendous public health need. That, of course, left the US without reserves soon to be needed.
DB2
I’ve said it numerous times, exactly what you said above. The costs of switching away from fossil fuels is a direct and noticeable expense. The costs of staying with fossil fuels is NOT direct nor very noticeable, but it is very real and it is very big. This is why all talks of “it costs too much to go renewable” are flawed. Nobody takes into account the costs of staying the course. They pretend they aren’t real.
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