ANALYSIS OF HOUSEHOLD RETROFIT EXPENDITURES.

The Energy Tax Act of 1978 established federal tax credits for household investments in certain energy conservation equipment (e. g. , insulation, storm windows and doors, clock thermostats). The credit for such conservation equipment is 15 percent of the first 2,000 spent (300 maximum credit). Internal Revenue Service data for 1978, 1979, and 1980 show that a total of more than 15 million returns claimed expenditures of 9. 5 billion (1978-) on residential retrofit measures eligible for the credit. State-level data on reported expenditures, household fuel costs, household income, heating degree days, population density, and the existence of state conservation tax credits and/or deductions were assembled for the three years. A regression equation was developed to explain variations in reported retrofit expenditures as a function of these explanatory variables plus dummy variables for the years 1979 and 1980. The equation explains 70 percent of the variation in reported expenditures across years and states.