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  • It’s Time to Stop Picking Winners and Losers in the Energy Industry

    Bill Clark/CQ Roll Call/Newscom

    Representative Mike Pompeo (R–KS) hopes his new bill calling for the repeal of all energy tax credits on both conventional and renewable energy sources will level the playing field for energy producers and consumers and prevent the government from picking “winners and losers.”

    The Energy Freedom and Economic Prosperity Act (EFEPA) targets billions of dollars in energy tax subsidies for repeal across a wide swath of production techniques and technologies currently receiving energy-only tax credits.

    EFEPA allows tax credits to expire over the next two years in areas such as transportation, oil, renewable energy, nuclear, and other types of fuels. Eliminated tax credits would not only include the wind production tax credit that received an eleventh-hour extension through the “fiscal cliff” deal for an additional year, but also tax credits for fuel mixtures and cellulosic biofuel. It would also eliminate investment tax credits for solar and geothermal production, along with a variety of other targeted subsidies.

    “It gets rid of every single tax credit in the entire Internal Revenue code related to energy,” Pompeo said at a press conference. Pompeo has introduced a similar bill in the past.

    Pompeo invited a challenge on the comprehensive approach of examining and eliminating energy tax credits for both “green” energy and fossil fuels by scouring the tax code and not overlooking any particular energy source.

    “If we’ve missed one, please identify it,” he said.

    The Heritage Foundation’s Nicolas Loris pointed to the need to eliminate corporate welfare and corporate dependence on tax credits set aside for energy, noting the distortions caused to the energy market, but also the cost to taxpayers in the form of handouts to a variety of companies:

    Rather than create a market in which the producer must innovate and lower costs to be competitive with other generating sources, companies spend more resources lobbying to receive these extensions. If a technology is profitable, however, the investments will occur with or without the subsidy. In that case, the subsidy offsets private-sector investments that would have been made anyway, and the taxpayer dollars are simply a generous handout to the company.

    Contrary to industry calls for continuing the tax credits, Loris argues that a return to a market-based and not a government-tilted energy economy not only “benefits economically viable producers” but also provides “consumers with reliable, affordable energy.”

    Pompeo stressed that his bill would be revenue neutral, providing a comparable reduction in tax rates for every dollar generated from the tax credit repeals.

    “This is not about wind. This is not about solar. This is about good energy and good tax policy,” Pompeo said. “It matters because there are real people paying for real energy out there.”

    “[Companies] don’t need to lean on the taxpayer to support them.”

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