In an email alert sent to members, Americans for Prosperity–Kansas calls for support for a Kansas Congressman who is fighting for free markets in energy. AFP–Kansas State Director Derrick Sontag wrote: “U.S. Representative Mike Pompeo (R-Kan.) is getting attacked for standing up for the free market principles that Kansas voters sent him to Washington to defend. You may have seen that T. Boone Pickens is trying to use out-of-state pressure from Oklahoma to lean on Pompeo. Pickens wants Pompeo to end his opposition to Pickens’ effort to get special tax treatment for natural gas vehicles. But Pompeo has it exactly right; Washington shouldn’t be picking winners and losers in the energy industry.”
The bill in question is H.R. 1380: New Alternative Transportation to Give Americans Solutions Act of 2011, or NAT GAS act. The bill provides a variety of subsidies, implemented through tax credits, to producers and users of natural gas. Last week the Wichita Eagle printed an op-ed from T. Boone Pickens which unsuccessfully attempted to make the case that these credits are not the same as subsidies.
Pickens also criticized Pompeo for failure to come out against all subsides, a criticism which is false and uninformed. On May 12th Pompeo introduced H. Res. 267, which is subtitled “Expressing the sense of the House of Representatives that the United States should end all subsidies aimed at specific energy technologies or fuels.”
The summary of the bill as provided by the Congressional Research Service is: “Declares that the House of Representatives should: (1) provide by refusing any legislative proposal that includes new energy subsidy programs of any kind; (2) prohibit the expansion or extension of existing energy subsidies; (3) eliminate existing energy subsidies; and (4) begin tax simplification and reform by eliminating energy tax credits and deductions and reducing income tax rates.”
That sounds clear and unequivocal to me: refusing … new energy subsidy programs — prohibit the expansion or extension — eliminating existing energy subsidies — eliminating energy tax credits and deductions.
(The full text of the Pompeo resolution is below.)
In yesterday’s Wichita Eagle, oilman Wink Hartman, who ran against Pompeo in last year’s primary election, argued against removal of tax credits currently in place for oil companies: “First, removal of tax credits for energy companies will not only hurt the intended political scapegoats — large oil companies — but will also hit small energy companies, too, including the dozens of Kansas oil producers fighting hard to find much-needed additional oil reserves and compete with the larger oil companies for their survival.”
But as argued recently in Forbes Magazine, these oil industry subsidies, like all subsidies, “make the economy less — not more — efficient.”
Authors Jerry Taylor and Peter Van Doren also argue that “Many conservatives argue that the elimination of these energy tax provisions and others like them for other sectors are tax increases. They are correct in a narrow sense. But in a larger sense they are incorrect because the elimination of such tax provisions makes the tax code more neutral and a more neutral tax code is a more conservative tax code.”
They also write that these tax favors “direct private investment to the favored businesses and away from the unfavored” and that “such favors are as much a part of big government as explicit appropriated spending. Tax breaks like this constitute big government on the sly.”
To the extent that the oil business — and any other industry — has incorporated special tax treatment into their business plan, we can support a phase-out of all tax favors instead of overnight elimination. This will give the companies time to plan for the transition. But aside from this consideration, we must end all such preferential treatment if we are to have a truly sound and robust economy.
Those wishing to express support for Pompeo can do so at AFP’s Action Center.
The resolution by Mike Pompeo and co-sponsors Raúl Labrador and Tom McClintock:
Expressing the sense of the House of Representatives that the United States should end all subsidies aimed at specific energy technologies or fuels.
Whereas companies continue to innovate and adapt to a growing and volatile energy market;
Whereas the primary role of the Government in the energy markets is to create an economic climate where companies can continue to innovate and compete, and thereby provide value and affordability to families and businesses;
Whereas it is not the role of the Government to favor one fuel source or energy sector over another;
Whereas taxpayers have subsidized the energy industry with grants, direct loans and loan guarantees, and tax credits aimed at specific industries for decades;
Whereas deductions and cost-recovery mechanisms available to all energy sectors are different than credits, loans and grants, and are therefore not taxpayer subsidies;
Whereas a deduction of costs and cost recovery with respect to timing is not a subsidy;
Whereas the current system of energy subsidies is opaque and unduly complex;
Whereas energy subsidies have consistently failed to bring down the price of gasoline for consumers, and electricity and natural gas for industrial users; and
Whereas eliminating energy subsidies from the Internal Revenue Code of 1986 will allow us to lower the overall rate of corporate income tax without increasing deficits: Now, therefore, be it
Resolved, That the House of Representatives should —
(1) provide no new energy subsidies by refusing any legislative proposal that includes new energy subsidy programs of any kind;
(2) prohibit the expansion or extension of existing energy subsidies;
(3) eliminate existing energy subsidies; and
(4) begin tax simplification and reform by eliminating energy tax credits and deductions and reducing income tax rates.
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