Here's our opportunity to end corporate cronyism, eco-socialism, and market distortions in the energy sector
It's that time of year again. The clock is ticking toward December
31, and green energy special interests are discreetly lobbying for the
extension of their choice handouts, credits, and grants. We must remain
vigilant against these powerful interests.
At the end of every
calendar year, Congress passes a 'tax extenders' bill to temporarily
reauthorize specific tax breaks that have not been permanently written
into law. These bills have traditionally dealt with issues like the AMT
patch, the R&D business credits, and universal deductions for
depreciation, as well as state and local taxes.
In recent years,
tax extenders have been magnets for non-universal carve-outs for green
energy. The 2010 tax extenders bill also included extension of the Bush
tax cuts, the annual Medicare 'doc fix,' a payroll tax cut, and an
unprecedented extension of unemployment benefits. Most of these
provisions are set to expire next month, and will consume the lion's
share of the debate and media coverage. This will give the green
industry the opportunity to surreptitiously slip in their handouts as
part of a grand bargain revolving around the bigger issues and
legitimate, universal tax deductions. They must be stopped.
far, the most pernicious of the green tax extenders is the 45-cent per
gallon Volumetric Ethanol Excise Tax Credit (VEETC). This credit, along
with the accompanying mandate and tariff, is nothing more than a pure
handout to an industry that would otherwise produce no profit. In fact,
this egregious market distortion has helped raise the cost of food and
fuel, reduce gas mileage, harm automobile engines, and hurt the poor.
This credit may even be refundable for those blenders that lack any excise tax liability.
It costs $5.7 billion per year, and must be eliminated. Additionally,
there are several other credits for cellulosic ethanol producers and the
biofuels industry set to expire that should be eliminated.
other major subsidies up for extension are the 30% Investment Tax Credit
(ITC) and the 2.2 cent/per kilowatt-hour Production Tax Credit (PTC)
for wind, geothermal, solar, hydropower, and biomass (PTC expires next
year). Most of these industries, particularly Big Wind, make little or
no profit, offer the public no investments, and pay no taxes, yet their
productivity is almost completely subsidized. The Heritage Foundation estimates that if the oil industry received a commensurate subsidy, they would get a $30 dollar check for every barrel produced.
According to CRS,
green energy investors may even “carry unused tax credits forward to
offset future tax liability, or, alternatively, partner with a
third-party tax-equity investor capable of providing cash in exchange
for tax benefits.” Hence, these are not tax breaks; they are
subsidies. You might consider them the earned income credits for
corporations. Talk about handouts for the rich!
green energy tax extender slated to expire is the “Section 1603” solar
and wind grant that was enacted as part of the stimulus. Over the
years, wind and solar has turned out to be such impotent and
unprofitable sources of energy that even refundable tax credits were
insufficient means of “stimulating” green energy projects. To that end,
Section 1603 of the stimulus offered renewable energy project
developers an immediate cash payment in order to recover up to 30% of
eligible project capital cost expenditures. This program cost about
$8.6 billion in less than three years, with wind receiving 84% of the grant award value and solar electric representing 75% of entities that have received grant awards.
addition, there are over a dozen more credits that are slated to
expire, such as those for alcohol fuels, biodiesels, renewable diesels,
hydrogen, plug-in electric vehicles, alternative motor vehicles, and
alternative vehicle refueling infrastructure. There are also a number
of personal credits for energy efficient homes and appliances. They all
distort the markets and help politically-connected industries.
After all of the subsidies, grants, and credits are factored in, solar is being subsidized by over 1200 times more than fossil fuels, while wind enjoys over 80 times more in taxpayer cash:
wind accounted for 0.9% of our energy supply, geothermal 0.2%, and solar 0.1%.
let anyone convince you of the moral equivalence between these
market-distorting, targeted handouts and universal deductions and
credits such as those for depreciation and R&D. As long as
corporations are still paying the 35% marginal tax rate, all universal
deductions should be maintained. These green companies, on the other
hand, can barely turn a profit, much less pay anything in taxes.
Republicans are rightfully investigating Solyndra and other crony
venture-socialist activities, their work will be rendered immaterial if
they continue to extend these 'tax breaks.' As a means of preempting
these tax extenders, Congressman Mike Pompeo (R-KS) has introduced
legislation (HR 3308)
to sunset all of the aforementioned non-universal energy tax credits
and grants, including those for fossil fuels and nuclear power. The
bill would use the savings from the repeal of these credits (roughly $90
billion over ten years) to lower the corporate tax rate on everyone,
including green energy companies (to the extent that they pay taxes at
all). HR 3308 has 12 co-sponsors, including Paul Ryan. It should garner
the support of the entire caucus.
We already know that the occupy
Wall Street crowd will be missing in action during this fight against
crony capitalism and venture socialism. Hopefully, Republicans will
take up the cause, as it reflects prudent policy and good politics as