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Over the weekend, Biden Administration Energy Secretary Granholm proposed that lower- and middle-income families should buy electric cars and go into debt to install home heat pumps, home insulation, and home solar panels because those families can claim a tax credit in the future. This was her answer for families struggling with inflation. She talked of a 30% discount on prices. Her exact language as to where the 30% discount is coming from is unclear, but it appears she was trying to say that the 30% tax credit specified in the “Inflation Reduction Act” amounts to a 30% discount on the price of installation. She was particularly pushing this at low- and moderate-income families.
But … unless the new tax credits are written differently from most prior tax credits (including prior energy-oriented tax credits), the credits are not “refundable,” meaning that the consumer can use them only to offset the consumer’s federal income tax liability. If the consumer has no federal income tax liability, the tax credit is not “refunded” to the consumer. A large percentage of low- and moderate-income families do not have federal income tax liability. A tax credit is useless to a person with no federal income tax liability.