Getting It Wrong on Energy and Tax Reform By William O’Keefe
http://www.realclearenergy.org/articles/2017/06/12/getting_it_wrong_on_energy_and_tax_reform_110234.html
Groucho Marx, not exactly known as a political philosopher, nevertheless once aptly observed that politicians look for problems, find them everywhere, misdiagnose them, and apply the wrong solutions. A recent letter on tax reform priorities signed by 16 Democratic members of the House of Representatives leads me to believe Marx may have missed his calling. The goals of tax reform are supposed to be simplification, a level playing field, and increased corporate competiveness. What the House Sustainable Energy and Environment Coalition proposes is the polar opposite.
Their proposal is an example of the willingness to punish the success and reward the failure of certain sectors of our economy. The focus of the letter is incentivizing “clean energy” but at its core it is nothing more than hostility toward fossil fuels and a fundamental misunderstanding of tax provisions for the energy sector. Unfortunately, this is nothing new and you would think by now proponents of this misguided approach to tax policy would have learned their lesson. But they haven’t and so they continue to propose the same ideas over and over, expecting a different result. The authors do reveal, however, that in addition to their hostility towards fossil fuels, they are using tax reform as a means of capturing more revenue to pass out to the chosen and favored few.
The basis for their “environmental tax priorities” includes discriminatory proposals to drive oil and gas out of our energy budget while attempting to replace them with alternatives. Since the great recession, the oil and gas industry has been a shining example of job creation and increased investment. The icing on the cake is that the energy renaissance has not only reversed the growth in imports but has made the United States the world leader in natural gas production.
If the House coalition had its way, tax provisions like the manufacturing tax credit and dual capacity rule to avoid double taxation would be changed to deny them only to the oil and gas industry while expanding special treatment for wind and solar energy which only survive because of large subsidies. Since neither wind nor solar are new and revolutionary, the justification for continued subsidies defy any economic rationale. Forcing uneconomic energy into an economy has been shown to only accomplish two things—economic harm and growing crony capitalism. A strong commitment to solar wrecked the Spanish economy and in Germany, which is the leader in the pursuit of alternative energy, electricity prices are three times the average rate in the US. Ironically, Germany also has had to build more coal fired plants for back up when the sun doesn’t shine. The folly of Germany’s Energiewende has been widely documented.
Our tax code has about 17,000 pages, making it 7 times longer than the bible. Its growth in complexity is a reflection of special interest success in moving it from a mechanism to fund the federal government to an instrument for promoting social policy. Complexity and discriminatory provisions are favored by those who can afford lawyers and lobbyists who work to ensure that their clients profit from the tax code instead of from the market place. Those who benefit the most from energy subsidies are crony capitalists and Wall Street firms; not consumers.
Fortunately, the White House and House Republican leadership have proposed tax plans that are built on achieving simplicity, greater efficiency, and establishing a level playing field – not on special interest pandering or singling out any one industry. Both tax plans will lead to increased domestic investment leading to more jobs and a stronger economy. And that’s no joke, Mr. Marx.
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