Why Are Wind Energy Tax Breaks Cronyism But Not Ones For Nuclear And Fossil Fuels?

Sen. Chuck Grassley Republican Senator, Iowa
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It seems as though opponents of wind energy try at every turn to undermine this industry. They portray the wind energy production tax credit as clutter that doesn’t belong in the tax code. But they conveniently forget the many tax credits that benefit other energy industries as permanent law, when wind energy is fortunate to receive a year or two extension at a time.

Many of us agree comprehensive tax reform is necessary to increase tax fairness, economic growth, and increase the worldwide competitiveness of U.S. businesses.

But just because we haven’t cleaned up the tax code in a comprehensive way doesn’t mean that we should pull the rug out from under domestic renewable energy producers. Doing so would cost jobs and harm our economy, the environment and our national security.

I’m glad to promote the wind energy production tax credit and wind energy. Wind energy supports tens of thousands of American jobs, it has spurred billions of dollars in private investment in the United States, and it displaces more expensive and more polluting sources of energy. More than 70 percent of a U.S. wind turbine’s value is now produced in the United States, compared to just 25 percent prior to 2005.

Once again, opponents of the renewable energy provisions want to have this debate in a vacuum. They disregard the many incentives and subsidies that exist for other sources of energy and are permanent law.

For example, the 100 year-old oil and gas industry continues to benefit from tax preferences that benefit only that industry. These are not general business tax provisions – they are specific to the oil and gas business. Here are a few examples: expensing for intangible drilling costs; deduction for tertiary injectants; percentage depletion for oil wells; and special amortization for geological costs. These four tax preferences for this single industry result in the loss of more than $4 billion annually in tax revenue.

Nuclear energy is another great example. The first nuclear power plant came online in the United States in 1958 – 56 years ago. Nuclear receives special tax treatment for interest from decommissioning trust funds. Congress created a production tax credit for this mature industry in 2005, which is available until 2020.

Nuclear also benefits from Price-Anderson, federal liability insurance, that Congress provided as a temporary measure in 1958. This temporary measure has been renewed through 2025. Nuclear energy has also received $74 billion in federal research and development dollars since 1950.

Are these crony capitalist handouts? Is it time to end market distortions for nuclear power? A Cato study found that “In truth, nuclear power has never made economic sense and exists purely as a creature of government.”

I don’t understand the argument that repealing a subsidy for oil or gas or nuclear energy production is a tax increase on energy producers and consumers, while repealing an incentive for alternative or renewable energy is not. It’s not intellectually honest.

I authored the wind incentive in 1992. I know it won’t go on forever. It was never meant to, and it shouldn’t. I’m happy to discuss a responsible, multi-year phase-out of the wind tax credit. In 2012, the wind industry was the only industry to put forward a phase-out plan.

But any phase-out should be done in the context of comprehensive tax reform, where all energy tax provisions are on the table. And it should be done responsibly over a few years, to provide certainty and ensure a viable industry.

Targeting certain provisions for elimination now makes little sense for those of us who want to reduce tax rates as much as possible. Tax reform provides an opportunity to use a current baseline that will allow the revenue generated from cutting back provisions to be used to pay for reductions in individual and corporate tax rates.

I’m for an all-of-the-above energy strategy. American consumers and businesses need a variety of energy sources to meet their needs: renewables, oil, gas and nuclear. Until we’re willing to debate each energy source on its merits, we should stop singling out one for criticism. Each form of energy has its merits and its drawbacks. Let’s have a transparent debate that compares them fairly.

Sen. Chuck Grassley of Iowa is the author of the original wind energy production tax credit.