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GOP Issues Blueprint for Tax Reform

July 26, 2016

House Republicans—led by Speaker of the House Paul Ryan (R-WI) and Rep.

House Republicans—led by Speaker of the House Paul Ryan (R-WI) and Rep. Kevin Brady (R-TX), the chairman of the House Ways and Means Committee—have released a tax-reform blueprint that could, if passed, end some notable energy tax credits, subsidies, and deductions.

The tax blueprint, released June 24, 2016, as part of a six-part plan titled “A Better Way,” outlines GOP lawmakers’ plan to target crony capitalism and tax preferences.

“The tax code is littered with hundreds of preferences and subsidies that pick winners and losers and create complexity,” the blueprint’s authors wrote. “[The tax code] directs resources to politically favored interests” and encourages investment decisions based on tax savings, “not on the most promising new technologies and innovations.”

Many in the Republican Party have highlighted subsidies given by the Obama administration to politically connected green-energy companies as prime examples of cronyism.

Emily Schillinger, communications director for the House Ways and Means Committee, says the committee intends to look at everything as it dives into tax reform in 2016.

“Chairman Brady and members of our committee are committed to building a tax code built for growth and one that is fairer, flatter, and simpler,” said Schillinger. “As the blueprint says, this goal necessarily means reform or elimination of some [of the] current special interests tax provisions.

“The blueprint is just the beginning of the process, and [the House Ways and Means Committee] will review all of the elements of our current tax code, including energy provisions,” Schillinger said.

Peter Ferrara, senior fellow for budget policy and entitlement reform at The Heartland Institute, which publishes Environment & Climate News, says cutting out subsidies is essential to the effort to implement successful tax reforms.

“Not only does the tax-reform plan say all special-interest tax subsidies in the tax code will be gone, it indicates such cuts will be necessary if reform is going to be revenue neutral, as both Ryan and Brady say it will be,” Ferrara said.

Energy Companies Reap Tax Preferences

According to a 2015 report by the Congressional Budget Office, the 2015 tax code provided more than $15.8 billion in tax preferences for energy development and use, with two-thirds of the subsidies going toward green-energy projects or energy efficiency projects.

For example, the Joint Committee on Taxation reported in December 2015 Congress renewed the previously expired solar- and wind-energy tax credits—at a cost of $9.3 billion and $14.5 billion, respectively—as part of Congress’ omnibus spending bill.

Benjamin Zycher, a resident scholar at the American Enterprise Institute, testified before the Senate Finance Committee on June 14, 2016, telling lawmakers, “It borders on the implausible that this latest extension of such subsidies for uncompetitive electric power technologies will prove to be the last when the 2019–22 congressional sessions arrive.” 

Need a ‘Level Playing Field’

Ferrara says there should be a level playing field for all energy sources.

“The energy market should be free, and lawmakers should enact an all-of-the-above energy policy,” said Ferrara. “But that doesn’t mean temporarily removing regulatory barriers to the production of energy. Each energy source must remain free to compete on its merits, with no government subsidies for any of them.”

Ann N. Purvis (ann.n.purvis@gmail.com) writes from Dallas, Texas. 

INTERNET INFO

Federal Support for the Development, Production, and Use of Fuels and Energy Technologies,

Congressional Budget Office, November 18, 2015: https://www.heartland.org/policy-documents/federal-support-development-production-and-use-fuels-and-energy-technologies

 

Benjamin Zycher, “Four Decades of Subsidy Rationales for Uncompetitive Energy,” Statement Before the U.S. Senate Committee on Finance Hearing on Energy Tax Policy, June 14, 2016: https://www.heartland.org/policy-documents/four-decades-subsidy-rationales-uncompetitive-energy

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