The Inflation Reduction Act (IRA) contains nearly $700 billion in refundable tax credits for electric vehicles (EVs), wind power, solar power, and a variety of other clean energy purposes. The administration regularly refers to this as the greatest investment in climate change possible, or similar language. This may be true, but it is frustrating because the credits are incredibly inefficient; the same reductions in greenhouse gases (GHGs) could be attained at a much lower cost using a more efficient policy, such as a carbon tax.

Alternatively, one could look at the distributional characteristics of the tax credits. McBride and Bunn note: “The energy credits are a boon for wealthy individuals with a preference for climate-oriented luxury goods, including expensive EVs and solar panels.” Also: “The energy credits also benefit large corporations. For instance, the Joint Committee on Taxation recently analyzed two of the business credits that were extended as part of the IRA, finding that corporations with gross receipts of more than $25 billion in 2020 received about $3.7 billion, or 53 percent, of the Section 48 Energy Credit and about $4.6 billion, or 62 percent, of the Section 45 Credit for Electricity Produced from Certain Renewable Resources.” That’s right, progressives’ climate policy is tax cuts (credits) for wealthy people and large, successful corporations.

Gee, that sounds familiar. Could it be that this is just trickle-down climate policy?

Of course it is. The left’s critique of conservative tax policy has always been analytically empty. It does not matter what the initial distribution of tax benefits looks like. What matters is the economic responses that they induce and the resultant distribution of economic well-being. Conservatives pursue non-distorting tax policies (low marginal tax rates; broad base) that raise productive investment and labor supply in the interests of generating higher real wages and a greater standard of living.

Progressives are pursuing these clean energy policies, not because they enrich wealthy individuals and large corporations, but because they believe they will raise the standard of living for target populations (“good-paying, union jobs”) and produce a better climate for all. They should be evaluated on those terms, just as conservative tax policy should be evaluated on its growth impacts.