As candidates ramp up for the 2016 campaign cycle, we will increasingly hear popular buzz words like “wasteful spending,” “reform,” and “level playing field” as they seek to boost their approval ratings. Campaigning aside, Congress and the administration are always discussing how to streamline our tax structure, but very little action ever actually gets taken.
Thankfully, Rep. Kenny Marchant (R-Texas) is taking steps to address the bloated apparatus that is this country’s corporate tax code by working to end the most egregious example of corporate welfare, the wind Production Tax Credit (PTC). I applaud Marchant’s wherewithal in identifying the PTC as a logical area to scale back via a bill he recently introduced, the PTC Elimination Act. Similar proposals have been estimated to save nearly $10 billion over ten years. The bill uses the savings to lower the U.S. corporate tax rate, which, being the highest in the world, is a major hurdle for American businesses. Surely, bolstering the American economy and workforce, instead of supporting an industry that admits will continue on its current growth path regardless of whether or not the PTC is reinstated, should be our priority.
The PTC Elimination Act would phase-out and repeal the PTC by doing a number of things, including repealing the inflation adjustment that exists for current recipients and thus reducing their subsidy by approximately 35 percent for its remaining time. That’s right – wind operators are able to take advantage of the credit for ten years, so Congressman Marchant’s bill would reasonably trim this down.
The bill would also notably clarify the “beginning of construction” threshold that currently exists for wind operators to qualify for the credit. Over the years, the IRS has made it easier for in-progress wind farm projects to qualify for the PTC. Projects now may qualify for the PTC if as little as 5 percent of the construction costs are incurred. This is a wasteful model that each year leads to wind operators racing to either invest 5 percent in their projects or begin certain types of physical work at the very end of the year to begin the qualification process for the credit. Once this process has begun, a project can be placed in service and begin claiming the credit years later. This allows multi-billion dollar corporations to begin a project with very little work or investment at the very end of one year and complete it at an undetermined time in the future. The PTC Elimination Act would strengthen the requirements for eligible construction to be continuous, significant, and finite, putting a much-needed end to this pattern.
More broadly, ending corporate handouts like the wind PTC is critical to showing that Republicans are serious about tax reform and will no longer take business as usual in Washington. Streamlining the tax code to get rid of subsidies like the PTC should be a priority for this country, and this bill takes one step towards that. The status quo of doing last-minute extenders packages is not the path to meaningful change.
Finally, it is worth underscoring that the PTC has reached its goal of helping wind become a sophisticated industry and then some. The Department of Energy has deemed wind a “sophisticated technology.” Even the CEO of the American Wind Energy Association (AWEA), Tom Kiernan, recently wrote that “the state of the wind industry is strong.” And, it’s only appropriate that AWEA released its annual market report on Tax Day, with the most recent, 2014 report highlighting that with corporate contracts now make up 23 percent of new wind power contracts. These findings reinforce the wind market’s ascendancy, as corporations like Amazon and Dow Chemical have contracts for electricity from wind. And, the New York Times has reported that wind and solar are beating conventional generation on cost in some regions even without the PTC. AWEA says that costs are down 50 percent in the last five years alone.
There is no reason to let the wind PTC continue and every reason to make it end. Congress should support Marchant’s bill and ensure that the wind PTC finally blows away.
Nickles served in the Senate from 1981 to 2005. He is the chairman and CEO of The Nickles Group, LLC, whose client list includes oil industry firms.
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