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End—Don’t Extend—the Wind Energy Tax Credit

Posted By Romina Boccia On February 24, 2012 @ 1:30 pm In Energy | Comments Disabled

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The Hill reports [2] that a bipartisan group of Senators is urging lawmakers to extend the wind energy production tax credit, which is scheduled to expire by the end of this year. Congress should let the tax credit expire and offset the resulting tax hike [3] with reductions elsewhere.

The wind energy industry has grown substantially since the wind energy production tax credit was adopted in 1992 [4], and yet wind produces only about 2 percent of our electricity nationwide.

Electricity from wind by itself is more costly to produce [5] (offshore even more so than onshore) than, for example, electricity from nuclear energy or coal. The additional costs are passed on to households in the form of rate increases. America’s poor pay an especially high price as electricity rates are needlessly inflated to force costly and unreliable energy sources into the grid.

In addition, the direct cost of the subsidy to taxpayers, as reported by the congressional Joint Committee on Taxation, would be $6.8 billion from 2011 to 2015 [6] for new projects implemented by the end of this year. This figure needlessly adds to America’s debt. And projects begun in response to an extension of the tax credit in the next year would only increase that number.

Subsidies like the wind energy production tax credit also perpetuate the mediocrity of the wind industry by distorting the market processes that guide entrepreneurs and investors toward the most promising energy solutions. As Heritage policy analyst Nick Loris writes [7]:

The subsidy has been artificially propping up jobs in the industry and shifted labor and capital away from other, more productive sectors of the economy.… Wind can compete without subsidies and the industry won’t entirely disappear.… Rather than having the subsidies promote technological stagnation in the industry, investments and resources would flow toward the most promising wind companies and technologies. This would allow for a strong wind industry that that can compete without subsidies.

Furthermore, as exemplified in the Solyndra scandal [8], government favors bestowed upon industries often go hand in hand with campaign contributions for supportive politicians. Government handouts or other special treatments encourage rent-seeking, or what’s often called crony capitalism. President Obama’s energy policy is filled with such favors in various forms, from subsidies and other  tax favors [9] to loan guarantees.

It is high time to wean wind off of federal government subsidies. Better yet, end all energy tax subsidies and offset those tax increases by lowering the corporate tax rate permanently, an approach put forth in legislation by Senators Jim DeMint (R–SC) and Mike Lee (R–UT) [10] in a companion piece to Representative Mike Pompeo’s (R–KS) bill [11].


Article printed from The Foundry: Conservative Policy News from The Heritage Foundation: http://blog.heritage.org

URL to article: http://blog.heritage.org/2012/02/24/end-dont-extend-the-wind-energy-tax-credit/

URLs in this post:

[1] Image: http://blog.heritage.org/wp-content/uploads/wind-construction.jpg

[2] reports: http://thehill.com/blogs/e2-wire/e2-wire/212307-bipartisan-senate-group-presses-reid-mcconnell-on-wind-tax-credit

[3] offset the resulting tax hike: http://www.heritage.org/research/reports/2012/02/tax-extenders-and-the-amt-patch-time-to-pull-the-plug-on-congresss-annual-dance

[4] adopted in 1992: http://blog.heritage.org../../../../../2011/12/09/gone-with-the-wind-subsidies/

[5] more costly to produce: http://nuclearfissionary.com/2010/04/02/comparing-energy-costs-of-nuclear-coal-gas-wind-and-solar/

[6] $6.8 billion from 2011 to 2015: http://www.nytimes.com/2012/01/27/business/energy-environment/clean-energy-projects-face-waning-subsidies.html?_r=2&pagewanted=all

[7] writes: http://blog.heritage.org../../../../../2012/02/02/we-need-wind-subsidies-like-we-need-vhs-subsidies/

[8] Solyndra scandal: http://blog.heritage.org../../../../../2011/08/31/politically-connected-solar-firm-goes-under-despite-federal-support/

[9] tax favors: http://blog.heritage.org../../../../../2012/02/23/morning-bell-obamas-crony-capitalist-trap-door/

[10] legislation by Senators Jim DeMint (R–SC) and Mike Lee (R–UT): http://blog.heritage.org../../../../../2012/02/02/time-to-end-energy-tax-subsidies/

[11] Representative Mike Pompeo’s (R–KS) bill: http://www.heritage.org/research/reports/2011/11/real-energy-tax-reform-eliminates-subsidies

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