As if the last month proved that Biden wasn't a climate president, his approval of the Willow drilling project in Alaska which will destroy a a pristine environment to produce over 180,000 barrels a day for 30 years, and his approval to sell millions acres of water in the Gulf to extract oil, should confirm this fact. These two deals occurred as the IPCC warned that “Our world needs climate action on all fronts,” and without them climate change will result in “increasingly irreversible losses.”
If humanity hopes to halt additional global warming, maintaining an uncomfortable, but livable 1.5°C increase, one essential element is a change in fuel. Humanity must stop consuming fossil fuels, and convert to renewable energy. Computers, lights, heating systems, appliances, and ovens must run on electricity generated with renewable sources.
The cost of this transformation should not be borne by the lower and middle classes, but by the wealthy. They have benefited from an unjust system, and consume more energy. By economic indicators I am a member of the middle class. Our household income is above the national median, but equal to the Massachusetts median. My spouse and I decided to pursue a project of converting our house so it runs entirely on solar powered energy. Follow along to see the effort.
Recently Mass Save came to our home. Mass Save is a state collaborative which aims to save homeowners energy and money. They perform free energy reviews every five years. They performed an initial review in 2018 when we purchased our home. That year we focused on small, simple improvements. This time we were open to more ambitious options.
The first was solar. We had considered adding solar panels previously. The problem; solar panels are expensive. The 2022 Inflation Reduction Act was touted as a great environmental achievement for the Biden administration. Prior to the Inflation Reduction Act, the federal government offered a Solar Investment Tax Credit, a tax credit worth 26% of the project's cost. A $30,000 project cost $22,200 after applying the tax credit. The Inflation Reduction Act raised the tax credit to … 30%. This is not a significant increase. In fairness, the legislation that established the SITC was supposed to decline in 2023, and continue declining. The Inflation Reduction Act rewrote the SITC to apply a 30% tax credit that lasts until 2032.
This 30% credit covers panels, inverters, labor, solar batteries, and sales tax. A 30% credit makes a $30,000 project cost $21,000 after application. The difference between 26% and 30% is $1,200. A small, and not substantial change. Crucially, this is a tax credit, meaning, complications. It is not a rebate. Note: I am not a tax expert, so everything I say could be wrong. If you know I am incorrect, please correct my errors. But I am not wrong. First, the credit doesn't kick in until tax return time. So the homeowner has to pay the $9,000 (on a $30,000 project) upfront, and then get it back in April 2024 (tax day was last week).
Secondly, if the homeowners pay less than $9,000 in taxes, they will only receive the total amount they pay in taxes. As presidential candidate, and vulture capitalist, Mitt Romney reminded everyone in 2012, 47% of United States citizens paid no federal income tax. In 2022, CNBC reported that 57% of households paid no federal income tax. I'm not a tax specialist, but if you don't pay federal income taxes, you can't get tax credits. Anyone who doesn't pay federal income tax can't be refunded for a solar panel project. The Biden administration could have made the tax credits refundable. Non-refundable tax credits allow the taxpayer to recover only the amount they paid in taxes. Refundable taxes allow the taxpayer to receive cash even if they paid the government no taxes. For example, prior to the pandemic, the Child Tax Credit, which is worth $2,000 per child, was partially refundable. Meaning, if you paid less than $2,000 in taxes, and had one child, you received part of the $2,000 anyways. In 2021 the government increased the tax credit to $3,600 per child, and made it entirely refundable. But in 2022 the credit reverted back to its prior, partially refundable version. The Biden administration didn't make the Solar Investment Tax Credit refundable. It is entirely non-refundable. Does anyone sense a lack of urgency? A lack of equality? A small, infinitesimal silver lining. Tax credits roll over from year to year. In our $9,000 tax credit hypothetical, if the homeowner only pays $3,000 in federal income taxes a year, it would take three years to earn the tax credit.
These numbers are relevant, because roughly speaking, they are mine. It will take years to earn back our refund. Non-refundable tax credits are only viable for corporations and the wealthy. They are only viable for governments that don't care about climate change. The Democratic controlled House, Senate, and White House, passed a law that doesn't help lower and middle class families. It is a subsidy for wealthy families and corporations.
This is just the beginning. More on solar power and other aspects to follow.
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