With the One Big Beautiful Bill Act now law, there could be a spike in consumer energy bills in states represented by Republicans and handouts to blue-state residents. That’s terrible news for everyday Americans and for members of the GOP hoping to hold on to their narrow majority in the Senate. However, it could have been much worse.
In theory, it should have been easy for congressional Republicans to work with the White House on a spending plan that lowers prices and taxes with the added benefit of protecting vulnerable GOP senators in Iowa, Maine, and North Carolina.
But because states generate electricity differently, this would mean reversing a perhaps too hastily made, ill-thought-out campaign promise: the elimination of the renewable tax credits put in place by the misnamed Inflation Reduction Act.
The bill phased out certain clean electricity spending and production tax credits, including the electricity generation (45Y and 48E), hydrogen production (45V), and advanced manufacturing (45X) provisions of the Inflation Reduction Act. Rather than addressing this situation, which former Trump Energy Secretary Dan Brouillette views as critical and which current Trump Energy Secretary Chris Wright seems to see merit in, Congress instead focused on raising the state and local tax cap and eliminating taxes on tips and overtime benefits.
America’s relationship with renewable energy is complex.
While the United States has become one of the biggest producers and users of solar and wind energy, the country predominantly uses fossil fuels to keep the lights on. Energy Information Administration statistics show renewables make up over 81,000 megawatts of energy generation compared to almost 119,000 megawatts of natural gas.
Where renewable energy production really took off was in states like North Carolina, Iowa, and Maine (plus other more reliably red plains states like Kansas and Nebraska) — particularly after the Inflation Reduction Act was passed.
EIA statistics show 67% of Maine’s total electricity net generation comes from renewable resources, mostly from hydropower and solar and wind generation. Particularly, solar energy saw a massive jump from 1% of total energy in 2019 to 13% in 2023. And Maine’s wind energy projects account for almost 70% of all wind generation in New England. That could jump even further as the state develops its offshore wind generation program.
Wind energy also massively powers Iowa’s electric supply. Almost 60% of the total electricity net generation in the state comes from wind. That’s up from 34% in 2019 and makes Iowa the second-largest wind power producer after Texas. Wind is also big in Kansas and Nebraska.
Meanwhile, North Carolina is fifth in the nation in solar power generation, which provides 10% of the state’s total generation, according to EIA statistics. Solar power has been the main driver of alternative energy since 2017, after surpassing hydropower. The wind energy industry remains small, accounting for less than 1% of energy.
Renewable energy proponents warn that these states run the risk of seeing an economic slowdown coupled with higher electricity prices if the Inflation Reduction Act tax credits are taken away.
A study by NERA Economic Consulting suggested North Carolina would see electricity prices jump 13% for homeowners and more than 20% for businesses. That puts strain on the economy and could cause the state’s GDP to contract by an estimated $640 million, with 5,000 jobs lost.
Iowa and Maine fared no better.
The study reported that Iowa electricity prices would jump 5.3% for homeowners and 6.3% for businesses. Meanwhile, the state’s GDP would contract by $590 million as 2,790 people would lose their jobs.
In Maine, electricity prices could rise 5.5% for businesses and 3.9% for households. The GDP takes a $60 million hit due to 750 jobs lost.
The rest of the U.S. could also see power supply and price headaches.
Energy demand is expected to shoot up 30% over the next decade, meaning the country will need a diverse set of electricity sources to keep the lights on.
A Brattle Group economic analysis released in February reported that getting rid of the Inflation Reduction Act renewable tax credits would seriously damage the U.S. economy.
“GDP and jobs would decrease because of higher electricity rates and less construction, mostly in rural areas, leading to a total market impact of $820 [billion],” researchers wrote. They estimated the GDP would reduce by $510 billion nationwide.
The study added there would be a 50% decrease in solar and wind investment if the tax credits disappeared. That could cause a shortfall in energy demand as natural gas-fired plants take time, and much more money than most politicians realize, to come online.
It would also raise prices, forcing the public to focus more on electricity bills instead of other purchases. And in North Carolina, it’s not just consumer energy bills at risk but also jobs.
It’s these conditions that have alternative energy proponents calling on the federal government to keep more of the Inflation Reduction Act energy tax credits, or at least introduce a longer, more moderate wind-down period for them.
Clean Energy Buyers Association CEO Rich Powell said people elected President Donald Trump because they were concerned about the economy.
“Now is the time for Congress to incentivize private investment in more sources of low-cost, reliable energy that fuels economic growth and jobs, helps the United States secure energy dominance and independence, and decreases energy costs nationwide,” Powell added.
That has certain Republican senators alarmed about what could happen to the economy if the tax credits go away.
“A wholesale repeal, or the termination of certain individual credits, would create uncertainty, jeopardizing capital allocation, long-term project planning, and job creation in the energy sector and across our broader economy,” Sens. Lisa Murkowski (R-AK), John Curtis (R-UT), Thom Tillis (R-NC), and Jerry Moran (R-KS) wrote in a letter to Senate Majority Leader John Thune (R-SD) in April.
The quartet warned that repealing the tax credits could also damage Trump’s vow to bring more manufacturing to the country and secure supply chains. While they acknowledged it was important to do some sort of reform to the tax system, the senators urged a “targeted, pragmatic approach” to keep priorities balanced and focused on economic competitiveness.
The good news is that Murkowski and Sens. Joni Ernst (R-IA) and Chuck Grassley (R-IA) were able to insert a 2028 phase-out of the renewable energy tax credits into the bill. That could save GOP control of the U.S. Senate in the 2026 midterm elections and possibly the 2028 election.
The partisan fight over the megabill caused Tillis to announce his surprise retirement, 18 months before his term was set to end, and after Trump threatened to find a primary challenger for him.
Democrats see Tillis’s seat as a pickup next year. They also see Ernst and Collins as vulnerable, and in some quarters, Murkowski is seen as a proxy for both Collins and her fellow Alaskan, Sen. Dan Sullivan (R-AK). None of these senators voted for the Inflation Reduction Act, but several have spoken about the need to protect certain renewable energy tax breaks for businesses.
Ernst, Murkowski, and Sullivan voted for the megabill, while Collins voted against it.
Meanwhile, the House and Senate’s compromise over the SALT cap could help imperiled House Republicans from states like New York and California.
Despite the cap being raised to $40,000, compared to the $10,000 passed in 2017, it appears to be temporary. The SALT cap reverts to $10,000 after the 2029 tax year. The Tax Foundation said this was “slightly better” than the original plan to keep the $40,000 SALT cap permanent.
It’s no surprise the deal was reached, given Trump’s mixed signals on the SALT policy.
Despite signing the 2017 tax cut bill that lowered the SALT cap to $10,000, Trump said last year he wanted to increase it.
He changed his opinion in May and told reporters, “We don’t want to benefit Democrat governors.”
And it’s worth remembering that Trump now votes in Florida, which, like Alaska and Thune’s South Dakota, has no income tax and is seen by many Republicans as providing a policy blueprint for the nation.
Fiscal watchdogs back up Trump’s comment.
A Tax Foundation analysis found 91% of SALT deductions were claimed by residents of California, New York, New Jersey, Illinois, Texas, and Pennsylvania. Texas is the only state with a Republican governor. All those who used SALT deductions made more than $100,000.
“[It] disproportionally benefits high-income taxpayers, violating the principle of tax neutrality,” the foundation noted.
The Committee for a Responsible Federal Budget reported that raising the SALT cap would add $916 billion to the bloated federal deficit over 10 years.
To be sure, the energy credit repeal would also have costs but could come in lower at $500 billion. Even if it were a direct swap for the value of the SALT cap portion of the House bill, it could benefit Republican members of the House and not just senators.
“At the end of the day, most of what swung the 2024 election to Trump was inflation and increases in the cost of living under Biden-Harris,” said GOP strategist Liz Mair, who has clients concerned about the tax reform bill. “If the tax bill is constructed in a way where energy prices in a bunch of states, including blue ones, spike by 5% or 10% or 15%, that could be just as politically deadly to the GOP as near-10% inflation under Biden was to his vice president.”
DEMOCRATS AND REPUBLICANS RACE TO DEFINE THE ‘BIG, BEAUTIFUL BILL’
“If you keep those costs down for residents of the red and purple states as well as blue states, that seems politically more useful than focusing on a provision that narrowly aids blue-state residents, and only looking at the House map when writing a tax bill.”
If Republicans wanted to stay in power in 2026, they may have had to sacrifice a talking point and to keep the lights on, as well as jobs. The middle-ground approach may work but sets up a bigger fight after 2028.
Taylor Millard is a freelance journalist who lives in Virginia.