Mar
29
2017

PACE in The Hill: Tax Reform An Important Part of Pro-Consumer Energy Policy

The following opinion piece from PACE Executive Director Lance Brown appeared in today’s edition of The Hill. Read the piece online here.

Later today, the House Energy and Commerce Subcommittee on Energy will convene to discuss the effects on federal energy taxes on power prices and the families and businesses who pay them. This is a timely topic for lawmakers, as eight years of changes to the energy sector by the Obama administration have already helped to distort the energy marketplace and place upward pressure on the price of electricity. The EPA, emboldened by the president and spurred on by the environmental lobby, ran amok. The regulatory landscape expanded and America’s utilities scrambled to find a path forward that met the demands of both customers and   administrative fiat.

Under recent executive leadership, sweeping decisions about the future of American energy didn’t always keep in mind those forced to pay the toll for new regulations. But as members of this energy subcommittee undertake their work today, they have a chance to begin moving the needle away from regulatory overreach and toward the direction of customers. Understanding that the committee’s session focuses on the role of energy taxes as part of a comprehensive tax reform effort, here are some principles we hope they will keep in mind during their meeting.

First, U.S. tax laws should serve to unleash America’s domestic energy potential, not restrain it. As Energy Subcommittee Chairman Fred Upton has stated, the tax code is a useful and effective tool for “driving energy policy” by increasing investment in fossil fuels, nuclear energy, renewable power sources, and energy efficiency. Our energy future is brightest and customers are best served when a diverse group of energy sources is at the disposal of utility planners. America’s energy sector doesn’t just need an “all of the above” strategy; it needs a “more of the above” focus. More options means greater reliability and lower prices.

Second, U.S. tax laws should be geared toward competitiveness in the global marketplace. Already, federal lawmakers are considering comprehensive tax reform such as the blueprint for change put forward by House Speaker Paul Ryan and House Ways and Means Chairman Kevin Brady. This plan would provide better tax treatment for American companies and ensure that imports and exports are treated equally from a tax perspective. And while slashing corporate tax rates and lowering the tax burden on small businesses is a central part of this bold plan, so too is the tenet that U.S. tax policy shouldn’t play favorites when it comes to energy sources. Energy companies, whether they produce fossil fuels or some other form of energy, deserve access to the same tax deductions and incentives for capital investment. Adhering to this principle will further grow American energy supplies and lower prices for customers on the home front.

While Senator Franken and others have attempted to label energy tax deductions by fossil fuel companies as subsidies, this characterization simply lacks basis in fact. Provisions such as Intangible Drilling Costs, the Section 199 Manufacturers’ Deduction, and others, are standard deductions of the kind taken by numerous other industries. They are not direct subsidies of the type showered on the for-profit solar industry in past years. In that light, lawmakers should take caution in how they frame arguments about energy sector tax deductions and resist calls for removing such incentives on the basis that they are something other than what they really are. Treating energy companies differently than their counterparts in other sectors isn’t just unfair; it creates distortions in the marketplace that ultimately hurt customers in the form of reduced supplies and higher prices.

Third, and finally, members of the committee should acknowledge that the key to long-term investment and growth in the nation’s oil and gas sector begins with stable and permanent tax laws. In 2015, traditional energy producers such as oil and gas were the second highest investors in America, devoting more than $33 billion to the nation’s energy infrastructure. In fact, this sector invested more than $160 billion from 2011 to 2015, creating millions of jobs and helping the American economy claw its way out of recession. Repealing tax provisions that have  buoyed the energy sector will only serve to undermine growth, erect barriers to capital investment, and curtail energy  supplies. On the other hand, a set of stable tax rules will further encourage the flow of capital and help customers by stabilizing prices in the long term.

The energy sector is more than a simply a bright spot in the American economy. It is a beacon of light capable of guiding the nation out of economic stagnation toward greater growth. Through smart and informed tax policy, a robust domestic energy sector can provide built-in advantages for American companies vis a vis their international counterparts and help ease the burden on families through lower and more stable prices. Wise energy policy can also move our nation closer toward true energy independence, reducing the need to import energy from the world’s trouble spots.

As the members of the House Energy and Commerce Subcommittee on Energy deliberate today, we encourage them to keep close in mind those who pay for American energy policy. By moving closer toward a tax code that serves American energy customers, they can help protect and strengthen their collective future.