PACE in The Hill: Fair, Pro-Growth Tax Policy Can Help Energy Consumers

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The following op-ed from PACE Executive Director Lance Brown appeared in the June 2nd online edition of The Hill. Read the piece online here.

When it comes to energy policy, language matters. That’s why a recent letter from the House Sustainable Energy and Environment Coalition, written by Democrats lawmakers, deserves careful scrutiny.

In their letter to House Ways and Means Committee Chairman Kevin Brady and Ranking Member Richard Neal, the lawmakers call for the Committee to consider a number of measures as part of House leadership’s efforts toward much-needed comprehensive tax reform. These include levying an “economy-wide price on carbon” and putting “an end to special interest tax breaks provided to the oil and gas industry.”

Notwithstanding the economic consequences of establishing a price on carbon, which recent experience in Australia has shown to be a disastrous undertaking, the American energy vision espoused by the House Sustainable Energy and Environment Coalition leaves much to be desired. Chief among the problems with the group’s vision is its insistence, echoed by the environmental lobby, that the oil and gas industry is the recipient of special tax breaks not enjoyed by businesses in other, namely renewable, resource areas. This is, of course, patently untrue.

While voices such as Senator Al Franken and the fifty House members who compose the Coalition have attempted to label energy tax deductions by fossil fuel companies as subsidies, they simply aren’t. Take, for example, the Section 199 Manufacturers’ Deduction, a tax provision taken across a broad spectrum of industries. While such deductions are employed by industries of all types, some in Congress erroneously paint them as special tax breaks for energy companies. This is a mistake.

Widely-used tax deductions are not the same as direct subsidies of the type showered on the for-profit solar industry, for example, in past years. In fact, while renewable power sources have received heavy direct subsidies from U.S. taxpayers over the past decade, fossil fuel industries have received nearly none. Not only does the House Sustainable Energy and Environment Coalition overlook the distinction between tax deductions and outright cash subsidies such as the production tax credit and investment tax credit for renewables, its letter calls for more taxpayer spending for direct energy subsidies.

The fact is that U.S. tax policy is a crucial tool for unleashing our nation’s domestic energy potential. Smart tax policies, those that are even-handed and energy agnostic, have been critical to quantum leaps forward in American energy production that have moved us closer to true energy independence. By confusing tax deductions with subsidies and potentially treating energy companies differently than their counterparts in other sectors, we risk jeopardizing the progress that has made the U.S. number one in resources such as oil, gas, and coal. Access to standard tax deductions helps to drive energy exploration and production, both of which continue to be necessary for meeting future energy demand. We also risk raising energy prices for American businesses and families, an outcome we can’t afford in our current economy.

The current momentum toward permanent, comprehensive tax reform presents not only a strong opportunity to grow the overall economy, but to create a solid pro-growth foundation for the energy sector as well. By passing tax reform that works for industries and taxpayers and eschewing policies that play favorites by singling out sectors such as fossil fuels, we can pave the way for an American energy future that works to the benefit of consumers.

The keys to long-term sustainability and growth in any sector, including energy, are stable and permanent tax laws and policies that don’t pick winners and losers. As members of Congress continue to work toward comprehensive tax reform that leads the nation’s economy toward a brighter future, let’s hope they have the wisdom to parse fact from fiction regarding energy subsidies and choose a path toward growth and fairness.