There’s plenty to hate in the Republican tax plan.
Most economists agree that the steep reductions in corporate tax rates won’t stimulate nearly enough revenue to avoid bloating the deficit. And if you’re a real estate broker or a graduate student, or if you take a deduction for state income taxes or local property taxes, then you're among the many who won’t be thrilled by the bottom line on their 1040.
To the list of economic sectors that will feel the hurt, add renewable energy.
The House and Senate versions of the bill differ in their approaches to the wind and solar industries, but both are bad news for clean energy. Commenting on the Senate version, Ken Kimmel, president of the Union of Concerned Scientists, said the bill would, “jeopardize the financing of numerous clean energy projects under construction and discourage future clean energy investments in wind and solar."
Wind projects have historically been financed using tax equity -- an arrangement that enables energy developers to take advantage of federal tax incentives despite having little or no tax liability. Wind energy enterprises lower their capital costs by, in effect, selling their production tax credits at a discount to a larger company that’s looking to reduce its tax bill. With the proposed changes in the tax code, the tax credits for wind would be less valuable to potential investors because corporate tax rates would be lower and the credits would expire sooner. In short, the bill would create headwinds for the wind industry.
Another potential setback for the clean energy movement is the House’s proposed elimination of the $7,500 tax credit for consumers who purchase electric vehicles. The hefty credit has been a critical factor in driving adoption in a nascent market. Its loss could be a serious blow to sales, particularly in states that don’t offer tax breaks for electric vehicles.
The move to eliminate the incentive for electric cars comes along just when the transportation sector is surpassing the electric power sector as the leading source of greenhouse gas pollution in the nation. Electrification of transportation should be a national priority. Killing the tax credit would be a short-sighted move that could slow advances in technology and ultimately make the American auto industry less competitive in global markets.
The House and Senate versions of the bill differ in their approaches to the wind and solar industries, but both are bad news for clean energy.
In addition to the attack on electric vehicles, the tax plan contains another friendly giveaway to the fossil fuel industry. By opening the Arctic National Wildlife Reserve to drilling, the Senate’s tax bill awards Big Oil a long-sought-after plum. This measure, of which a solid majority of Americans disapprove, was tacked on primarily to secure a crucial vote for the bill, but the Republicans are making the dubious claim that oil leases will generate billions of dollars to help offset the loss of revenue resulting from corporate tax cuts. The actual impetus for opening the reserve to drilling is political and ideological in nature, not fiscal.
Overall, the approach to energy issues in the GOP tax plan is distressingly consistent with the pro-fossil-fuel positions that Trump and his party have been pushing all along. An overhaul of the tax code is a rare opportunity to adopt forward-looking policies that are both environmentally and economically sound, but the Republicans are moving in the opposite direction from where the country should be going.
Instead of dialing back incentives for wind and solar energy, the bill should make it more attractive for investors to develop these critical industries.
Instead of discouraging consumers from buying electric cars, the bill should prod the global shift away from the internal combustion engine.
Instead of leaving intact the enormous tax advantages enjoyed by the oil and gas industry, the bill should include a tax on carbon that reflects the actual cost that fossil fuels impose on the environment and public health.
The social implications of the Republican tax plan are troubling on many fronts, ranging from its assault on healthcare to its exacerbation of income and wealth inequality. So it’s not surprising that the pending legislation expresses the conservative skepticism of anthropogenic climate change and ignores the urgent need to reimagine our energy economy.
There’s a lot to hate in this tax plan — why would we expect energy policy to be an exception?