Commentators, as well as congressional Democrats, have criticized the Republican tax bill for being rushed through the House and Senate without significant debate.
While that complaint – plus the fact that, according to the Congressional Budget Office’s most recent analysis, the bill could increase the federal deficit by $1 trillion or more – has merit, the new tax bill should bring some much-needed sanity to federal energy policy, and in particular to the lavish subsidies being given to wind and solar energy combined.
While the final details of the tax overhaul must be hammered out in conference committee, both the House and Senate bills aim to slash the subsidies being given to wind and solar. Those tax giveaways are distorting wholesale electricity markets and costing taxpayers tens of billions of dollars.
In January, the Joint Committee on Taxation estimated that federal subsidies for wind energy will cost the federal treasury $23.7 billion between 2016 and 2020. Solar subsidies will cost $12.3 billion over that same time period.
Not only is that a lot of money, it’s also far more generous, on an energy-equivalent basis, than what the federal government provides to the hydrocarbon and nuclear sectors. In May, the nonpartisan Congressional Research Service issued a report on energy-related tax rules. It found that in 2016, solar and wind energy got more federal taxpayer cash ($6 billion) than the oil, coal and natural-gas sectors combined ($5.2 billion). Solar and wind got more cash despite the fact that coal, oil and gas produced 24 times as much energy last year as wind and solar.
The story is even more appalling when it comes to nuclear energy. Again, according to the Congressional Research Service, on an energy-equivalent basis, solar energy got 182 times as much in federal subsidies last year as the nuclear sector – and wind energy got 68 times more.
Those are staggering figures, particularly given the fact that the domestic nuclear sector – which helps reduce carbon-dioxide emissions – is in a full-blown crisis, with numerous reactors being forced to shut down in recent years and with many more, including the Indian Point reactors in Westchester County, likely to be prematurely shuttered.
The caterwauling from the rent seekers can be heard from Montauk to Jerry Brown’s kitchen in Sacramento.
A spokesman for the American Wind Energy Association told The New York Times that “even the threat of this bill is having a chilling effect” on new wind installations. The lobby group for Big Wind claims that “50,000 US jobs” are at stake.
But recall that wind subsidies will cost the federal treasury $23.7 billion between 2016 and 2020. Thus, each wind-related job costs taxpayers about $474,000. That’s an expensive gig, especially when you consider that the median household income in the United States last year was about $57,600.
Another good thing about the looming tax changes: The House version of the bill scraps the federal credit for electric vehicles. Current federal policy provides a subsidy of up to $7,500 to EV buyers. Who buys those cars? Rich people. A 2013 analysis found that Tesla buyers have an average household income of $293,000.
For years, renewable-energy advocates have been telling us that wind and solar are getting cheaper. We’re hearing the same about electric vehicles. But as those industries see their gravy train derailed, we’ll soon find out just how competitive they really are.
Robert Bryce is a senior fellow at the Manhattan Institute.
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