Wind Cronyism at the Crossroads: Time to Weigh In

“After 25-years of subsidy-driven financing of renewable energy, Main Street Americans are now taxed billions annually so the richest Wall Street bankers and corporations can avoid their tax burden by funneling money to big wind development.”

“We support the House provision to remove the PTC inflation adjustment. Retaining the 2.4¢/kwh subsidy in light of lower installation costs and increased production confers a bounty on big wind that far exceeds what 1992 lawmakers could ever have envisioned.”

– Linowes letter to lawmakers (below)

With the Energy Policy Act of 1992, a substantial tax credit has gone wind’s way. A quarter-century and many extensions later, this gravy train is at risk of being partly derailed.

It’s about time.

While conferees will reconcile the House and Senate versions of the tax bill this week, it appears that a haircut will happen to industrial wind power via the Production Tax Credit (reduced amount, stricter calculation). Solar’s large Investment Tax Credit is also at issue. The details can be found in Lisa Linowes’s recent post at MasterResource: “U.S. Tax Priorities Sack Big Wind.”

Linowes Letter

In a “Dear Friends” communication over the weekend, Lisa Linowes of WindAction Group urged the anti-wind movement to write involved lawmakers to “counter the overwhelming blitz of letters and pleas from big wind and the massive financial institutions and corporations that fund wind as a means of curbing their tax bill.” Her letter follows:

Dear Majority Leader McConnell, Speaker Ryan, Chairman Hatch and Chairman Brady:

We are writing on behalf of many, many thousands of taxpayers to thank you for putting America First when crafting the tax bills now in reconciliation. We are well aware that the largest financial institutions and Wall Street bankers, international tax-equity investors, S&P 500 corporate lobbyists, and the ever-coddled wind energy industry are pressuring Congress to protect their tax credits at our expense. As you consider the final bill, we hope you will keep in mind the following facts.

1. Wind PTC. After 25-years of subsidy-driven financing of renewable energy, Main Street Americans are now taxed billions annually so the richest Wall Street bankers and corporations can avoid their tax burden by funneling money to big wind development.

We support the House provision to remove the PTC inflation adjustment. Retaining the 2.4¢/kwh subsidy in light of lower installation costs and increased production confers a bounty on big wind that far exceeds what 1992 lawmakers could ever have envisioned.[1] We also support the language clarifying PTC-eligibility by including the requirement for continuous construction (or progress). IRS guidance issued after enactment of PATH flouted Congressional intent and effectively transformed the PTC phase-out into a 5-year PTC extension. Without reform, the PTC tax will grow to an additional $32+ billion in the next decade.[2]

2. Base Erosion Anti-Abuse Tax. The Senate Bill addresses a long-time issue of multinational corporations shifting revenues overseas to avoid their tax burden. No carve-out should be allowed for renewable energy tax credits. As taxpayers, we are unwilling to bear the cost of these tax credits so the largest financial institutions and corporations can lower their tax burden.
3. Corporate Minimum Tax (AMT). We are surprised and frankly disgusted that corporations are complaining about the AMT. Not satisfied with slashing the corporate tax rate to 20%, they are still demanding corporate welfare to pay for their R&D costs.[3] The Wall Street Journal reports that among S&P 500 corporations claiming the R&D credits, as much as 85% of the benefit flowed to just 20 companies in 2016. Apple, Alphabet and Intel collectively claimed nearly half of that or $1.5 billion. These same corporations all feed at the big wind and solar tax credit trough while the rest of us make up the difference with the Treasury. Reducing the corporate tax rate to 20% is ample reward. To demand even more is insulting. The AMT should remain.

The opportunity to enact major tax reform is rare. The overarching goals of these two tax bills are obvious and much bigger than any one sector or special interest. We encourage you to stay the course and remember those who are paying their taxes before granting consideration for those who seek to avoid them. Respectfully,

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[1] Wind PTC: Excessive Benefit Demands Repeal. November 4, 2017.

[2] Wind Energy and Tax Reform: It’s Past Time. November 30, 2017.

[3] The Wall Street Journal, Companies Push to Repeal AMT After Senate’s Last-Minute Move to Keep It Alive.  December 5, 2017.

Linowes ends: “If you, your group, or anyone you know is interested in having their voice heard on this letter, please email me or go to this petition and sign on – https://www.gopetition.com/petitions/stop-the-production-tax-credit-for-industrial-wind.html”

Remembering First Principles

The long-suffering opposition to wind-power cronyism is in a take-what-you can get mode. Of course, the clearest and best way to undo the disproportionate federal subsidy to politically correct renewables is to do what Deroy Murdock wrote in response to reading the above letter.

I am for killing the wind-credit. Just kill it, DEAD.

This letter confuses things with “continuous construction,” “PTC extension,” etc. HUH? The simple message should be: “Kill the credit, PERIOD. If you want to build windmills, spend your own damn money to do so.” The rest of this language becomes a total, swampy muddle.

Also, this letter calls for keeping the corp. AMT. I want to see all AMTs killed – corp. and ind. Fill out your taxes once, and then pay. It’s grotesque to expect anyone to do one return and then do a second, at his own expense, to give Uncle Sam one more chance to vacuum his pockets. I might have signed this, but the AMT language is a deal killer.

I agree with you on wind and admire your initiative here. However, I would advise that petitions address just ONE issue, as cleanly as possible. Every issue you add creates tension, confusion, and scares off people who otherwise would agree with you. Conversely, if you want to keep corp. AMT, don’t add wind to that petition. Lots of folks who agree with keeping corp. AMT would not sign such a petition if it called for killing the wind credit. [1]

Murdock reminds his readers about how polluted the House and Senate versions have become:

I wish Congress had adopted President Trump’s simple tax proposal: Three rates, top rate: 35 percent, 15 percent corporate tax, kill the Death Tax, kill the AMT, etc. They decided to get cute, and now they have a lumbering and confusing bill that beats the status quo but will creak and lurch forward, rather than zoom along like a race car. Why the hell the GOP insists on turning clear, simple victories into convoluted nail biters is one of the deepest mysteries of our age.

Murdock references Stephen Moore’s recent New York Post op-ed, Republicans’ tax plan takes a quirky swipe at the little guys  that documents how a “backdoor,” “stealth” capital-gains tax “contradicts the entire purpose of an otherwise prosperity-generating tax bill.”

Certainly, the final product will be very complex and not what began as thoroughgoing tax simplification/reform. But that is the nature of the beast described by Public Choice economics, a subject for another day.

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[1] Email communication from Deroy Murdock to Mary Kay Barton, December 9, 2017.