In recent years, Oklahoma lawmakers have authorized multiple tax incentives to encourage wind power development. The Oklahoma Property Rights Association compellingly argues that these incentives do little more than throw taxpayer money down a politically correct hole.
Members of the association believe wind farm regulation should be increased to reduce negative impact on adjoining property owners. But the group also argues that wind energy tax incentives far exceed any economic benefit. Wind energy boosters brag that their industry has generated multimillion-dollar investments in Oklahoma. But the association estimates the state will provide $1.4 billion in direct subsidies over the next 10 years.
Currently, wind farms qualify for three major tax credits. The turbines are exempted from ad valorem taxation for five years. In a recent meeting with The Oklahoman’s editorial writers, Rick Mosier, a Claremore businessman who is a founding member of the Oklahoma Property Rights Association, said wind farms account for $32 million of $64 million in ad valorem exemptions statewide. Unlike other businesses, wind farms aren’t required to generate a specific number of jobs in order to qualify for an ad valorem tax exemption.
To protect entities that depend upon local property tax collections, state government replaces the lost revenue. This is done by directing a portion of state income tax collections to that use. But the state has struggled to keep up its end of the bargain. This year, Mosier noted, lawmakers had to divert 2 percent of income tax collections to the reimbursement fund.
Ad valorem tax exemptions could total $70 million per year by 2017 thanks largely to wind turbines. Ironically, this could mean the state will have less income tax to fund services such as education in order to make up for lost property taxes that would otherwise benefit schools.
Wind farms also qualify for a zero-emissions tax credit tied to kilowatt-hour production. In 2013, wind farms generated 10.8 million kilowatt hours of power, which translates into $54 million in tax credits. And that figure is growing.
Mosier said only $18 million in zero-emission tax credits was claimed in 2013. But, prior to 2014, he notes, those using the credits had to have a tax liability. Changes since approved by legislators allow credit recipients to instead sell the credits back to the state for about 85 cents on the dollar, making the credits a source of income even when no tax liability is owed.
Mosier points out that other states cap the amount of zero-emission tax credits that can be issued. Oklahoma doesn’t. And since the tax credits can be used at any time within 10 years of issuance, it’s conceivable that multiple years’ worth of tax credits could be claimed in a single year. That could quickly turn a state budget surplus into a shortfall.
Wind farms also qualify for an investment tax credit equal to 1 percent of investment for up to five years. Reportedly, no one has claimed that credit – yet.
Wind energy has become a bigger piece of the state’s energy portfolio, which is a positive thing. But at a minimum, lawmakers should review wind power incentives to make sure benefits exceed costs, and to ensure that tax breaks don’t wreak havoc on state budget planning. Policymakers need to take this issue seriously. Otherwise, they may find there’s a high cost to being “green.”
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