Will Congress Let the Wind Power Tax Credit Die?

Congress remains sharply divided over decisions to extend the wind power production tax credit (PTC). Set to expire on December 31, the PTC currently grants wind power producers a tax credit of 2.2 cents/kilowatt-hour, in addition to a federal wind power investment tax credit. Last week Sen. Chuck Grassley (R-Iowa) released a video urging Congress to extend the benefit contending that "it should be part of the effort in Washington here to get more Americans working."

Grassley argues that without the PTC extension wind power would be the only energy source not subsidized by the federal government. American Energy Alliance president Thomas J. Pyle, speaking to The Daily Caller, replied to Grassley's concerns "Senator Grassley complains that ending the PTC will mean that wind energy is the only source not receiving government support. That sounds like a good start to us." This reiterates the Alliance's letter to Congress urging them to scrap the PTC in which they argue "American consumers-not Washington lawmakers- should decide the future of American energy"

David Kreutzer, writing on The Heritage Foundation's blog, agrees. The tax credit has "created an industry that produced overpriced, intermittent power," he says, which will "continue to produce overpriced, intermittent power so long as there is a PTC to pay for it." Kreutzer points to European examples of wind subsidy failures, including Spain, which dropped subsidies as soon as the economy began to nosedive, and Germany, which recently reduced subsidy commitments as a result of spiraling costs and unreliable energy outputs.

Extending the PTC subsidies for just one year would cost the federal government $12.1 billion, according to the Joint Committee on Taxation. Without the extension the Energy Information Administration estimates that wind generation will still increase 50 percent between 2012 and 2035. Standard & Poor also estimate that over $150 billion will be invested into renewable energy opportunities- largely wind-based- regardless of whether the PTC is extended.

Comments

[Auric Demonocles]

Wind-based pun blows away alt-text fans

I'll be in my bunk.

[WTF]

Well I'm certainly blown away.

[$park?]

Stay there long enough and you might get your second wind. Just don't blow it.

[A Serious Man]

Dust in the wind, all we are is dust in hte wind.

[$park?]

Pulvis et umbra sumus.

[Lord at War]

Only for a moment, and the moments gone.

[R C Dean]

"it should be part of the effort in Washington here to get more Americans working."

And another member of TEAM BE RULED shows his fascist colors.

"Everything for the state, nothing outside the state, nothing against the state."

I mean, its not like the capital that is diverted to subsidize wind power would be productively applied if left in private hands.

[Pro Libertate]

Oddly, if the government did nothing, people would still work and find jobs.

[LTC(ret) John]

They might even do more work and find more jobs.

[R C Dean]

By joe logic, because the government has done something, there is no reason to believe that people would still work, etc., if the government did nothing.

[WTF]

'joe logic'? Isn't that like 'tall midget'?

[21044]

^^ 😉 ^^

[np]

I don't like the use of tax incentives for social and market engineering, but unless these are refundable credits, tax credits in general are not subsidies.

[Hugh Akston]

Except for those tax credits where people who don't do X pay higher taxes, and people who do X get to keep more of their money.

[np]

Well, that's why I say it's not really a subsidy, unless you think "keeping more of your own money" is a subsidy.

And what you say applies to deductions not just credits.

I understand the contention and as I said, I don't like the social engineering, but it's the fault of the government punishing people who don't do X, and their fault for implementing such rules, rather than the responsibility of people who take advantage of doing X.

[R C Dean]

I don't think its refundable now.

I think tax credits are in a gray area as far as being subsidies. Deductions aren't subsidies, because they recognize that you pay tax on your net income.

Refundable credits are clearly a subsidy.

Even non-refundable tax credits, though, don't merely reduce your taxable income; they reduce your tax bill dollar-for-dollar. That's a lot more like a classic subsidy than a deduction would be.

[np]

Both still reduces your tax bill.. you can think of the (non-refundable) credit like a dynamic taxable income deduction, whose percentage grows to meet a certain fixed $$ amount.

In any case, I'm all for flat taxation, where you lower everyone's to where they would be the same with the best tax reductions (deductions and/or credits). A few other countries have done it, but as you know, that's not happening here...

[OldMexican]

Re: RC Dean,

That's a lot more like a classic subsidy than a deduction would be.

It is possible albeit one can argue that the tax credit is not enough to become a true subsidy in that it impacts the price to the consumer. In this case, it only affects the tax burden of the company.

Nevertheless, the fact is that the subsidy issue is nothing more than a red herring thrown as a tu quoque by those with a stake in wind energy. The fact is that the dispersion of production inherent in wind energy, coupled with the lack of productive consistency, makes wind energy uneconomical when compared to other methods of energy production.

[OldMexican]

Congress remains sharply divided over decisions to extend the wind power production tax credit (PTC).

Divided by the line that separates those that are supported by their wind-energy cronies and those that are not.

Grassley argues that without the PTC extension wind power would be the only energy source not subsidized by the federal government.

Which tells me that Grassley has not known a dictionary all his life. Just for starters, GASOLINE is far from being subsidized and it is still an energy source if memory serves, unless the laws of physics suddenly changed these past days without my knowledge.

This idea that energy is "subsidized" is nothing more than a red herring. Sure, electrical power is subsidized in most states but that is only because it is politically convenient to give away energy to voters, not because the industry needs help. Wind energy conversion is inherently uneconomical, no matter how much money you throw at it or how much you want to obfuscate by calling anything a "subsidy."

[OldMexican]

Last week Sen. Chuck Grassley (R-Iowa) released a video urging Congress to extend the benefit contending that "it should be part of the effort in Washington here to get more Americans working."

It would seem that the Pod people supplanted most modern politicians with copies from 1938. Next, you will have senators or congresscritters asking the government for infrastructure projects like dams and bridges to get more Americans to work...

... oh... no.

[LTC(ret) John]

Um, what he said! Thanks for saving me the effort and time.

[waaminn]

Now there is a dude that clearly knows what time it is. Wow.

http://www.IP-Hidden.tk

[NL_]

Does it really make environmental sense to give renewable energy tax credits while taxing carbon? Wind credits (solar credits, etc.) make the government lose money. The more money going into renewable energy, the more income lost to the tax man. Meanwhile, carbon taxes might hurt carbon production, but they are a reward to the government.

As we've seen in eminent domain, the government will offer cheap land, streamlined permitting, and front-loaded tax credits to get long-run tax revenues. Even though business activity is discouraged by taxes, the government ultimately is willing to play ball to see more of it. They abating one tax to a concentrated group in order to increase the tax revenue from a more diffuse group. So tax credits to build a facility that will create a few hundred taxable incomes is a win to the government. Or accelerated depreciation credits (part of the stimulus effort) to give greater deductions to buyers in order to generate more taxable income for the sellers of depreciable assets.

Tax policy focuses on the incentives of specific tax deductions, penalties, and credits. But to focus on the long run, we have to remember the incentives being reflected back on the planners. The effect on government is a little more muted than on taxpayers, but it's no less real. Just speaking politically, renewable-related taxpayers looking at the long run need to present themselves as revenue sources to the government, not just photo ops.

[Redmanfms]

Something, something, government can drive innovation, something, something, dinosaur energy, something, something. Internet blah, blah, blah, blah, so can solar power. Something, something, subsidies for big oil, something, something.

/Envirofascist

[Death Rock and Skull]

Anything other than a pure flat tax rate might as well be a subsidy. The economic manipulation more than cancels out the benefit of "keeping more of your money". That money may very well be at the expense of others, as is the case with wind power.