Rocket fuel: the IRA in North Carolina


Summary:

  • The Inflation Reduction Act led to a large economic expansion in North Carolina
  • Advanced manufacturing has experienced a rebirth across the nation as a result
  • The Trump administration’s plans to freeze or cancel IRA funding would end that expansion, and is likely illegal

On Jan. 20, 2025, shortly after taking the oath of office for the second time, Donald Trump promised that his would be a stark contrast from the past administration. “The golden age of America begins right now,” he said to attendees in the Rotunda. “I will, very simply, put America first.”

Unfortunately, his actions since then suggest that he did not include North Carolina. Following this declaration, a series of executive orders threw uncertainty into a wide and growing range of America’s economy. One of these orders, titled “Unleashing American Energy,” paused funding for many economic programs from the Biden administration, including the Inflation Reduction Act (IRA).

The “IRA” was landmark legislation that made large investments in clean energy and American economic competitiveness, with a heavy emphasis on advanced manufacturing; and, true to its name, inflation also plummeted after its passage.

Trump spent much of his campaign for President vowing to repeal the IRA, while puzzlingly also promising to “bring back” American manufacturing, though no plan to do so was ever released. At times, he described the IRA as the “Green New Deal,” a progressive policy framework aimed at addressing the climate crisis and economic inequity in the United States.

What the IRA has done

Despite the political divide in Washington, the IRA invested billions of dollars in North Carolina, and unlocked many billions more in private capital. Its resulting job creation and infrastructure have been a boon for North Carolina’s economy. The Trump administration’s push to reverse the IRA would threaten to reverse those benefits.

According to E2, a nonprofit that tracks the impact of laws on the environment and economy, the IRA’s passage in 2022 has led directly to 24 new economic development projects totaling roughly $21 billion in investment and almost 12,000 new jobs in North Carolina. Texas, Michigan, South Carolina, and Georgia are the only states with more such projects.

These projects include Wolfspeed’s $5 billion manufacturing facility in Siler City, where they will produce advanced semiconductors; Toyota’s $14 billion electric battery manufacturing facility in Liberty; Forge Nano, a materials science company, whose $165 million investment created 204 jobs in Morrisville; Boviet Solar, a renewable energy company, whose $294 million investment to build a manufacturing facility in Greenville will create more than 900 jobs. There are dozens more such examples.

These dollar amounts are almost entirely private investments. The public investments from the IRA are mainly in the form of tax credits, for which qualifying such projects are newly eligible. Benefitting companies thus have their own “skin in the game,” with public dollars used to leverage private investment.

Trump’s vow to freeze or repeal the IRA and its investments could threaten to stop or even reverse this progress. According to E2, about 88% of North Carolina’s manufacturing projects supported by the IRA are in the manufacturing sector. Despite Trump’s public rhetoric about manufacturing, his executive order jeopardizes the livelihoods of thousands of North Carolina workers.

Another aspect of the IRA that is also at risk are consumer tax credits. According to the IRS, the IRA created and updated many tax credits, including those for electric vehicles, home energy efficiency, and renewable electricity credits. Using these credits, residents who installed “energy-saving improvements” such as solar panels, windows, heat pumps, and insulation in their homes were rewarded.

According to the Environment North Carolina Research and Policy Center, 62,490 residents saved thousands on the Energy Efficient Home Improvement Credit in 2023 alone. Additionally, more than 85,000 North Carolinians saved about $170 million on their taxes. These credits were supposed to grow to encompass improved electrical wiring and additional home upgrades by 2025. However, Trump’s executive orders could set those taxpayers back to square one.

What happens next

Since Trump’s flurry of executive orders, federal agencies were given 90 days to submit reviews and recommendations to the Office of Management and Budget and the National Economic Council. With the new administration at the helm, those reviews could change how the remaining IRA resources are allocated – if they are at all.

But those decisions will not be without legal challenges. One such major hurdle is the Impoundment Control Act of 1974. This law grants Congress a procedure to review the executive branch’s decision to withhold money that Congress has appropriated. Under the U.S. Constitution, it is Congress, not the President, that holds the purse strings – and under the law, Trump needs Congress’s assent to change how they have appropriated public funds. Parties have also argued that President Trump violated Article I of the Constitution, which granted Congress budget power. A lawsuit with constitutional grounds would likely be settled by the Supreme Court.

However these arguments are resolved, North Carolina and her business community will be watching anxiously. The Inflation Reduction Act has been instrumental in expanding our state’s economy and creating a generational opportunity that not only offers good, high-paying jobs, but also serves America’s interests in expanding our advanced manufacturing base. Nixing that progress out of partisan political spite would be a mistake.

Christopher Frazier, a member of the Carolina Forward Research Staff, is a student at NC Central University.