HARBIN: Congress faces first tax reform test

Wind production credit set to expire

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The main federal subsidy for wind energy is set to expire in six weeks. Supporters and opponents both are out in full force on Capitol Hill, for the issue has a symbolic importance. The wind energy subsidy is a bellwether for comprehensive tax reform. Congress‘ decision on wind handouts may foreshadow whether it will clean up the tax code during the next session, as many members promise. If Congress isn’t willing to let the wind production tax credit expire, there’s little hope they will live up to their pledge.

Left, right, and center — nearly everybody agrees that corporate welfare is bad in the abstract. They pay lip service to broadening the base and lowering the rates. They opine that the government should not pick winners and losers using the tax code. If we got rid of all targeted handouts, then all industries could face a lower rate, not just the government’s favorite few.

Unfortunately, Washington lawmakers consistently fail to put these words into action. When they consider targeted handouts in isolation, they end up extending the same old corporate welfare policies that have long dominated the tax code.

The problem is an institutional one. Once a particular handout is on the chopping block, special interests descend upon Capitol Hill to convince members how essential it is. They cry that the labor force depends on it and the national economy will grind to a halt without it. They have a strong incentive to lobby their friends in the Oval Office and Capitol Hill to keep the playing field tilted to their favor. This is a big institutional problem and it stands directly in the way of efforts to clean up the tax code.

In the end, it means that well-organized, well-connected industries like the Big Wind lobby can pad their pockets at the expense of the American taxpayer.

Our tax code is cluttered with targeted handouts, and the wind production tax credit (PTC) is simply one of them. If Congress can’t stand up against the Big Wind lobby over a $12 billion tax credit program, then how will it be able to close the hundreds of billions in other loopholes? How can Congress actually deliver on pro-growth tax reform?

There are many reasons to be skeptical that it will. Curiously, some of the most vocal cheerleaders for extending the wind subsidy are Republicans, the purported party of fiscal restraint and the supposed champions of low and neutral tax codes.

In particular, Sen. Chuck Grassley, Iowa Republican, has been a consistent proponent of extending wind subsidies. Even Gov. Sam Brownback, who has made the tax code broader and lower in Kansas, is on board with Big Wind. This week he led the Governors’ Wind Energy Coalition in calling on Congress to extend the tax credit.

If Congress is serious about fixing our broken tax code, it should let the wind tax credit expire. If it doesn’t have the backbone to end corporate welfare for the wind industry, there’s little reason to believe that it will end it for any other industry.

Christine Harbin is the federal policy analyst for Americans for Prosperity.

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