Following is a letter from a coalition of organizations led by Americans for Prosperity advocating for the end of special treatment and subsidies for one industry.
September 24, 2013
Dear Senators and Representatives:
On behalf of the millions of members that our organizations represent, we encourage you to oppose extending the main source of federal support for wind energy, the production tax credit (PTC). The problems with bestowing government favors on wind energy are myriad — it doesn’t produce cheaper energy, it threatens electrical grid reliability, it’s inefficient, it’s unprincipled tax policy, to name a few — and it’s time to end this misguided handout.
Proposals to phase out the credit over time are a red herring. A phaseout is still an extension, and it does not address any of the problems that arise from government backing for wind energy. Besides, the PTC in its current form already has a phaseout built in: Wind farm projects may claim the tax credit for 10 years following receiving an investment letter.
In addition, we discourage you from including a PTC extension in a large tax extenders package at the end of the year. This is precisely what happened this past December; a 1-year PTC extension and expansion found its way into the Fiscal Cliff deal at the last minute. This provision expanded wind farm eligibility from those that were already in operation to those that were simply in the planning stages. If Congress is serious about comprehensive tax reform that lowers rates for everyone, then special provisions like the PTC that clutter the tax code should be first on the chopping block.
The PTC is scheduled expire on December 31, 2013. Congress should ensure that it does so as to clear the way for a simpler, less burdensome tax system across the board.
Also, Christine Harbin Hanson, a policy analyst for Americans for Prosperity, contributes the following article:
Expiring wind subsidies bring a sense of déjà vu to Capitol Hill. The main federal tax break for wind energy, the wind production tax credit (PTC), is on track to expire at the end of the year, and history is poised to repeat itself. This year, Congress should break from the past and end this wasteful handout for the wind industry, once and for all.
Over the next four months, Washington will engage in the same debate as always. The wind industry will claim that it needs even more time and more subsidies to get on its feet. Meanwhile, Americans for Prosperity and our coalition partners will point out the numerous economic and philosophical problems with the tax credit — it doesn’t produce cheaper energy, it’s an unreliable energy source, it’s inefficient, it’s not principled, it distorts markets, etc. Over the last twenty years, Congress has repeatedly agreed to the PTC, usually in one or two-year intervals.
This is exactly what happened with this past extension. Big Wind produced a flurry of lobbying activity while Senate Minority Leader McConnell (R-Ky.) and Vice President Biden (D) negotiated a deal to avert the Fiscal Cliff. As Tim Carney noted in the Washington Examiner at the time, this lobbying included “Obama’s closest corporate confidants as well as former congressmen from both parties.” In the end, a 1-year PTC extension and expansion found its way into the Fiscal Cliff deal at the 11th hour, alongside several additional targeted tax credits for renewable energy. Not only was the subsidy extended but it was expanded from wind farms that were already in operation to those that were simply in the planning stages.
This upcoming expiration has a plot twist: The American Wind Energy Association senses that its D.C. gravy train may be coming to an end and it will likely propose phasing down the tax credit over a period of years. Congress should avoid this trap. A phaseout is still an extension, and it does not address the problems that arise from subsidizing wind energy. Besides, the PTC in its current form already has a phaseout built in: wind farm projects may claim the tax credit for 10 years following receiving an investment letter.
Washington may be wising up to the pitfalls of using federal incentives to encourage politically-favored energy sources. Grants and loan guarantees are drying up, tarnished by repeated failures like Solyndra, Beacon Power, Ener1, A123 Systems and the list goes on-and-on. The main tax breaks for ethanol have also gone away, and momentum is building in Congress to repeal green energy mandates like the renewable fuel standard. This phase out proposal is Big Wind’s attempt to get more drink at the taxpayer trough.
Laughably, the only group calling for making the tax credit permanent is the White House. Apparently the Obama administration has still not learned from its repeated green energy failures, showing just how out of touch it is with economic realities.
Congress should end—not phase down, not extend—the wind production tax credit this year. Americans deserve energy solutions that can make it on their own in the marketplace—not ones that need to be propped up by government indefinitely. Washington’s long-time policy of giving preferential tax treatment to special interests simply isn’t working.
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