As reported by the Daily Caller News Foundation, these individuals, earning over $100,000 annually, claimed around $5.5 billion of the approximately $8.4 billion in tax credit claims. The IRS data further revealed that these high earners were over three times more likely to claim the credits.
The residential energy tax credits are divided into two categories: "energy efficient home improvement credits" for purchases such as upgraded heat pumps and air conditioners, and "residential clean energy credits" for items like solar panels and batteries. Both categories saw significant expansion under the 2022 Inflation Reduction Act (IRA), as stated by the U.S. Department of Treasury.
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Preston Brashers, a research fellow for tax policy in The Heritage Foundation’s Grover M. Hermann Center for the Federal Budget, expressed his concern to the DCNF. He stated, “Americans making an average or below-average income don’t have extra room in the budget for electric vehicles and solar panels or to invest in green energy companies. Many everyday Americans can barely afford groceries and rent, let alone Energy Star-rated homes filled with energy-efficient appliances.”
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The IRA, President Joe Biden’s signature climate bill, allocated $370 billion for green initiatives out of the $750 billion in new federal spending it authorized. This included expanding energy efficient home improvement credits from 10% of project costs to 30%, and extending the residential clean energy credit to include battery storage systems, as per the U.S. Energy Communities Interagency Working Group.
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A spokesperson for the Treasury Department defended the tax credits to the Daily Caller News Foundation, stating, “These credits are overwhelmingly benefiting middle-class families, and nearly half of the families who claimed one or both credits had incomes of less than $100,000 in 2023. More broadly, the Inflation Reduction Act is delivering investment to left-behind places — communities at the forefront of fossil fuel energy production and those that have benefited least from the economic growth of the past few decades.”
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However, IRS data contradicts this claim, showing that while just under half of the families who claimed credits had incomes of less than $100,000, these families claimed far fewer total tax credit dollars. Filers making over $100,000 claimed twice as many tax credit dollars for residential clean energy and around 65% more tax credit dollars for home energy efficiency. Moreover, 75.7% of filers earn less than $100,000, indicating that those making over $100,000 a year were twice as likely to take advantage of residential clean energy credits and four times as likely to take advantage of home energy efficiency credits.
While the Biden administration argues that these green technologies will save low-income families money, the high upfront costs can be prohibitive. Forbes reports that the average cost of a residential solar panel system in the U.S. is roughly $18,600 in 2024, falling to approximately $13,000 after a 30% federal solar tax credit is applied.
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O.H. Skinner, executive director of the Alliance for Consumers and the former solicitor general of Arizona, criticized the residential tax credit program, telling the DCNF, “This is all truly an indictment of the environmental justice narrative that is used to sell these types of programs and push progressive lifestyle choices onto everyday people. The left is aware of this, and in turn says that it is the emissions reductions that benefit the poor, even if that means we have to subsidize the rich… That galling message is cold comfort to most consumers, who see their taxes go up, their electric bills go up, the costs of goods go up… and their household appliance costs go through the roof, while high earners cash tax credits for their fancy progressive lifestyle choices.”
A study by the National Bureau of Economic Research published in July found that the majority of the $47 billion in green tax credits claimed between 2006 and 2021 went to households in the top 20% of incomes earned. This comes at a time when many Americans are struggling to pay their bills, with credit card balances that are more than 60 days overdue and revolving balances reaching their highest point in the first quarter of 2024 since the Federal Reserve Bank of Philadelphia began tracking 12 years ago. Overall prices have risen more than 20% since Biden took office in January 2021, with electricity prices having increased over 30%, according to FRED.
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Ben Lieberman, senior fellow at the Competitive Enterprise Institute, told the DCNF, “It is clear that the tax credits in the Inflation Reduction Act primarily benefit wealthier Americans. The regressive nature of these provisions flies in the face of the [Biden administration’s] environmental justice rhetoric.” The IRS deferred to the Treasury Department, and the EPA did not respond to a request for comment from the DCNF.
