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Joint Letter in Opposition to Special Tax Treatment for Natural Gas Vehicles (time for free-market, fuel-neutral energy policy)

“The federal tax code is already overly complex and needs to be simplified. It would be far better to remove all subsidies, set-asides, and special treatment for all forms of energy than create new complexities through the NAT GAS Act.”

This letter to Congress was sent by American Energy Alliance, Americans for Prosperity, Club for Growth, Council for Citizens Against Government Waste, Freedom Action, The National Center for Public Policy Research, and Sixty Plus Association. It is reproduced here for its educational value in the general debate over special government favor to politically correct energies.

Dear Senator:

We are writing [in regard to] amendment 1782—the New Alternative Transportation to Give Americans Solutions (NAT GAS) Act.

Members of this coalition have previously written to Congress to oppose both this NAT GAS Act in January of this year and the previous version in May of last year. We are writing again because we oppose tax increases, subsidies, and special treatment for politically-preferred energy sources and this NAT GAS Act includes all three.

Say No to New Financing Subsidies, Special Tax Treatment, and Increased Taxes. The NAT GAS Act creates vast new subsidies for natural gas vehicles. The NAT GAS Act includes a scheme to provide large tax credits for natural gas vehicles, the production of those vehicles, and natural gas fueling infrastructure. These tax credits are “paid for” by higher taxes on natural gas fuel. This is both a subsidy and it is special treatment.

These types of incentives are a subsidy because of the financing costs. Natural gas proponents argue that natural gas vehicles have high upfront costs, but by providing special tax treatment, the upfront costs would be reduced and this would be “paid for”
through higher taxes on the fuel. But if this is truly the problem, there is no need for the federal government to intervene because repaying high upfront costs over time is exactly what banks and other financial institutions deal with every day. The reality is that the NAT GAS Act is providing a financing subsidy through this scheme of using a “user fee” to essentially repay the costs of the upfront special tax treatment.

This scheme is little different from the federal government’s loan to Solyndra. Banks are willing to loan money to people that present little risk, but Solyndra and natural gas fueling infrastructure obviously present enough of a risk to need a government subsidy.

The Market is Already Working Because Natural Gas is Incredibly Inexpensive Compared to Oil. There is no need for Congress to intervene to try to pick winners and losers in the natural gas market—the market is already responding to lower natural gas prices in an efficient and cost-effective way. This week GM and Chrysler announced new natural gas pickups and GE and Chesapeake Energy announced a new partnership to provide natural gas fueling infrastructure. All of these things actions do not depend on taxpayer dollars, mandates, or special treatment.

People realize that natural gas is ridiculously cheap, especially compared to oil. The current Henry Hub spot price is $2.30 MMBtu. This is the lowest price is a decade. But even if natural gas costs $5 per MMBtu (including delivery costs), that is equivalent to gasoline at 65¢ per gallon. This $3-a-gallon price difference between natural gas and gasoline is driving people and companies that switch to natural gas powered vehicles without Congressional intervention.

Trying to subsidize the switch to natural gas is destined to waste money similar to what happened with subsidies for the bankrupt Solyndra, Beacon Power, and Evergreen Solar. It’s not that Solyndra and the other companies did not have interesting or compelling technology. The reality was that their technology was not ready for prime time and the U.S. taxpayer would have been better off not betting on these speculative energy plays.

The federal tax code is already overly complex and needs to be simplified. It would be far better to remove all subsidies, set-asides, and special treatment for all forms of energy than create new complexities through the NAT GAS Act.

1 comment

1 Jon Boone { 03.14.12 at 7:27 am }

The national debt is today $15, 525, 522, 858, 887.64–and counting, with each citizen’s share at $49,698.02–and counting. Any tax loophole under such circumstance, including this misbegotten one, should be anathema.

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