Giving tax credits to the wind energy industry is a waste of time and money.
Despite being famous for touting the idea that the rich don’t pay their fair share of taxes, investor Warren Buffet seems to be perfectly fine with receiving tax breaks for making investments in Big Wind. “I will do anything that is basically covered by the law to reduce Berkshire’s tax rate,” Buffet told an audience in Omaha, Nebraska recently. “For example, on wind energy, we get a tax credit if we build a lot of wind farms. That’s the only reason to build them. They don’t make sense without the tax credit.”
But while the wind production tax credit may be great for Buffet’s bottom line, it’s harmful for American taxpayers and energy consumers.
The credit’s proponents say that tax breaks for green energy technologies will encourage innovation, but they fail to acknowledge that Washington’s history on these handouts and tax breaks for green energy have consistently failed. For example, we cannot control when or how much the wind blows, and it just so happens that it tends to blow when we need it least. On average, wind energy facilities operate at just 30 percent of their capacity and must be backed up by more reliable forms of energy such as natural gas. Instead of producing energy solutions that can survive and thrive in the marketplace, we’re left with botched green energy projects that have brought us no closer to our energy goals.
If private companies like Berkshire Hathaway are not willing to jump in without government incentives, it is a sign that the energy technology is a bad investment. It simply does not make sense for the government to subsidize energy technologies that are economically unviable, while attempting to restrict other options that provide reliable and affordable energy for everyday Americans.
We’ve all heard the saying, “there is no such thing as a free lunch,” and the very same adage applies to government subsidies. By arguing that that tax credits are needed to create jobs, proponents overlook what the rest of the economy gives up in exchange. When lawmakers give special tax breaks to their friends and favorite industries, they shift the burden onto everybody left in the tax base. While subsidies may allow wind turbine makers to pump up their payrolls, the rest of the economy suffers as a result. The subsidy diverts labor and capital away from productive areas of the economy, which slows overall economic growth. With only a 0.1 percent GDP growth rate in the first quarter of 2014, slowing down is not a viable option.
Despite the statements of subsidy supporters, artificially propping up industries has a very real cost.
Not only are federal wind subsidies a colossal waste of money and detrimental to the economy, but they subsidize an industry that is actually harmful to the environment. The alleged goal of incentivizing “green energy” industries is to help protect the environment, but with wind energy comes a slew of environmental problems. For example, it is estimated that wind turbines in the U.S. kill up to 328,000 birds annually, and, last year alone, wind turbines killed 600,000 bats. What’s more, the amount of land needed for wind farms to be effective is staggering. For New York City to be powered by wind alone, every square meter of Connecticut would need to become a wind farm.
After expiring at the end of last year, Big Wind’s bread and butter subsidy – the production tax credit – is moving through Congress again. The Senate Finance Committee recently agreed to a measure that would retroactively extend it, which is likely to pass on the Senate floor. On the other side of Capitol Hill, the House Ways and Means Committee is poised to consider similar legislation later this summer – a package that extends the expired tax breaks. Unlike their colleagues in the Senate, representatives on the committee should hold firm and ensure that this handout for the wind energy industry stays out of the package.
Outside the Beltway, people are starting to notice the tax credit’s negative effects. Led by groups like Americans for Prosperity and the American Energy Alliance, there is an overwhelming opposition to wind subsidies at the grassroots level. (Full disclosure: I sit on AFP’s Board of Directors.) Leading up to the tax credit’s scheduled expiration last November, a diverse coalition of more than 100 organizations sent a letter to Congress, asking them to let the credit expire. American families are increasingly upset that subsidies for wind energy make them pay more and more when their energy bills come due each month.
Congress should stand up to special interests in the wind energy industry and oppose efforts to resurrect expired wind subsidies. Their constituents didn’t send them to Washington to enact policies that cost jobs, distort the energy market, and drive up energy bills – but by repeatedly extending the tax credit, that’s exactly what they’re doing.
At the end of the day, competition and free markets should shape U.S. energy policy, not handouts or favors for special interests like Big Wind.
Nancy Pfotenhauer is president of MediaSpeak Strategies, a national communications firm. She was a senior policy adviser and spokesperson with the McCain for President campaign, and has served as president of the Independent Women’s Forum, director of the Washington office of Koch Industries, a cabinet level adviser, economic counsel to Sen. Armstrong, and chief economist for the RNC, then serving on President Bush’s transition team in 1988.
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