Republicans claim they are unable to roll back anti-free market policies with their limited control of the federal government. But one would expect them to block renewals of bad policies once they have expired.
Last year, Congress allowed the wind energy subsidy (Production Tax Credit) to expire, along with dozens of other targeted market-distorting “tax extender” pork provisions. Evidently, not being able to take yes for an answer, some Republican members of the Senate Finance Committee helped Democrats pass these special interest subsidies.
All conservatives agree that we need to lower the tax burden on businesses and individuals who actually pay taxes, but it is important that we differentiate between tax cuts and subsidies. Tax cuts take the form of universal reductions in net taxes for those individuals and entities that actually incur a positive tax liability. Targeted or parochial credits (and certainly refundable credits) for specific industries, products, or services-especially those who pay little or no taxes-are nothing but subsidies and corporate welfare.
The extenders bill, which contains dozens of targeted tax credits and deductions for businesses worth close to $85 billion, is nothing short of government-sponsored selection of winners and losers in private enterprise.
The most egregious of the tax extenders are the energy subsidies. Most of these industries, particularly Big Wind, make little or no profit, offer the public no investments, and pay no taxes, yet their productivity is almost completely subsidized. The 2.2 cent per kilowatt-hour production tax credit is by far the most offensive of the credits. The Heritage Foundation estimates that if the oil industry received a commensurate subsidy, they would get a $30 dollar check for every barrel produced. This refundable credit is the corporate equivalent of the Earned Income Credit and is woefully distorting of the energy market.
The extenders package also contained all sorts of credits for green construction, electric cars, and biofuels.
To be clear, the package also includes deductions that affect most individuals, such as those for mortgage interest and state and local taxes. Even though conservatives would rather abolish those distortions in return for dramatic reductions in marginal rates, allowing those exemptions to lapse under the current system would result in a large increase of taxes on many Americans. However, those deductions should either be reformed or made permanent (until we implement wholesale tax reform), not held hostage by Washington “cliff-style” deadlines coupled with green energy pork.
Senator Sen. Pat Toomey (R-PA) did propose an amendment to eliminate all of the energy subsidies within the package, but it only garnered the support of five other Republicans-Senators Burr, Enzi, Hatch, Isakson, and Roberts. Democrats voted down the amendment, along with support from GOP Senators Grassley, Crapo, Cornyn, Thune, and Portman. Ultimately, the underlying bill was adopted unanimously by voice vote.
Hence, both Republicans and Democrats profess a desire to clean up the tax code and close “loopholes,” yet they can’t even let a pair of subsidies that have already expired remain at rest.
For all the talk about incorrigible bipartisanship on Washington, most of the work on a committee level is quite harmonious. Sadly, it usually benefits the corporate lobbyist and permanent political class.