{"id":526396,"date":"2010-04-13T17:18:24","date_gmt":"2010-04-13T21:18:24","guid":{"rendered":"http:\/\/climateprogress.org\/?p=22937"},"modified":"2010-04-13T17:18:24","modified_gmt":"2010-04-13T21:18:24","slug":"america%e2%80%99s-hidden-power-bill-examining-federal-energy-tax-expenditures","status":"publish","type":"post","link":"https:\/\/mereja.media\/index\/526396","title":{"rendered":"America\u2019s hidden power bill – Examining federal energy tax expenditures"},"content":{"rendered":"

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Center for American Progress’s Richard W. Caperton<\/a> and Sima J. Gandhi<\/a> have put together an excellent report<\/a> on the remarkable waste of taxpayer’s dollars on perverse subsidies for the profitable fossil fuel industry. <\/span><\/em><\/em>I am reposting the executive summary<\/a>:<\/em><\/p>\n

<\/span><\/em>The most important day of the year for the many energy companies that receive federal financial support isn\u2019t the day the president releases his proposed budget, or the day appropriations bills get passed, or even the day when government checks get sent out. It\u2019s tax day. Why? Because each tax day energy companies\u2014electric utilities, oil refiners, renewable energy developers, coal miners, ethanol producers, and others\u2014record billions of dollars worth of special tax credits and deductions.<\/p>\n

Tax expenditures\u2014government spending programs that deliver subsidies through the tax code via special tax credits, deductions, exclusions, exemptions, and preferential rates\u2014are the dominant type of federal support for the U.S. energy industry. Altogether, these spending programs amount to 60 percent of the government\u2019s total support to the industry. These tax expenditures are functionally equivalent to direct spending, but they are often subject to less scrutiny.<\/p>\n

Energy-related tax expenditures serve a broad range of purposes, from promoting renewable electricity generation to encouraging domestic production of oil. But the question is, are these energy programs working? And is implementing programs through the tax code the best way to achieve government goals?<\/p>\n

The Center for American Progress demonstrated in \u201cAudit the Tax Code: Doing What Works for Tax Expenditures<\/a>\u201d (released in conjunction with this paper) that tax expenditures suffer from a lack of transparency, evaluation, measurement, and oversight. Energyrelated tax expenditures are not immune to these problems, and in fact they suffer from the same shortcomings as other tax expenditure programs.<\/p>\n

The basic problem with tax expenditures is that they are often not thought of as a form of spending, which makes for a dangerous double standard. When considering spending policymakers ask themselves, \u201cIs offering hard-earned taxpayer dollars as a subsidy to a private, profit-making company a good idea?\u201d But if the spending is cast as a tax expenditure the assessment is different. Even though tax expenditures come at a cost to taxpayers\u2014 as with any other type of spending\u2014they are viewed through a different, less critical lens. Viewing tax expenditures through the same lens as other government expenditures provides a clearer image of both how they support public policy and use public resources.<\/p>\n

Are these energy programs working? And is implementing programs through the tax code the best way to achieve government goals?<\/span><\/p>\n

This paper will adopt that lens to look at two energy-related tax expenditures: the percentage depletion allowance in the oil industry and the production tax credit, or PTC, in the wind industry. We also consider a program in which a tax expenditure was temporarily converted into direct spending: the cash grant in lieu of the investment tax credit, or ITC, for wind generation.<\/p>\n

We chose these three areas both for their political timeliness\u2014the president\u2019s budget proposes the elimination of some fossil fuel subsidies, and ITC provisions will expire unless renewed\u2014 and their size (these are all fairly large expenditures). Through these three examples we are able to explore the major issues in tax expenditure design and evaluation.<\/p>\n

Through this analysis, we find these tax expenditures lack accountability, transparency, and measurability, yet there is some indication that the wind-related expenditures are effective. We find little justification for the percentage-depletion allowance, but we do find that when tax expenditures are redesigned and offered as direct spending\u2014as with the cash grant in lieu of the ITC\u2014the program can be more effectively monitored and managed.<\/p>\n

Our analysis in the pages that follow illustrate that spending programs implemented through the tax code play an important role in supporting energy policies. Accordingly, these programs must be examined with the same level of scrutiny as direct spending. The following recommendations can help the government use its limited financial resources to most effectively promote desirable energy policies:<\/p>\n