National disparities in residential energy tax credits in the United States

Abstract

The Inflation Reduction Act (IRA) promises to deliver $270 billion in tax incentives starting in 2023, expanding on the existing $18 billion in federal income tax credits for clean energy investments. Despite the continued investment in clean energy tax credits, not all communities have historically benefited equally from these programs. This work investigates the presence of disparities in the residential energy tax credit (RETC) program, which was recently expanded under the IRA. We use quantile regression models to explore disparities in the participation in and average value received from the RETCs across demographics. Because tax credit programs result in second-tier benefits such as job creation, we compare the relationship between RETC participation and the presence of clean jobs across demographics. We find that rural communities, renter-occupied communities, and communities of color are disproportionately participating less in the RETC. However, we observe that when renter-occupied or communities of color do participate, they see higher average value comparatively as well as more clean jobs associated per tax return with the RETC. While disparities across demographic groups persist in participation in the RETC, these findings suggest that renter-occupied or communities of color see more benefits when they do participate.