- - Tuesday, December 2, 2014

ANALYSIS/OPINION:

After a well-deserved victory, Republicans have finally been granted their chance to take on comprehensive tax reform. This is a laudable, and, frankly, overdue goal that needs to happen next Congress. However, this goal faces many challenges. Chief among these is stopping the semi-annual extension of failed tax policies like the Production Tax Credit (PTC) for wind energy, which is set to come up for a vote imminently in Congress.

If Republicans allow the PTC to be extended during the lame duck session, it will cast doubt on their commitment to deliver true tax reform. Because the truth of the matter is, how can our party say we are done with “business as usual” politics while at the same time letting the $13 billion behemoth that is the PTC sneak its way through the legislative process in the lame duck? Hopefully Senate Republicans will prove that they are serious about real tax reform by letting the
PTC expire.

The PTC is an inflated subsidy that was originally enacted in 1992. Not only has the credit been around for over 20 years and been extended eight times, but it is so large that wind operators actually continue generating wind – even when the power is not needed – just to earn the payment.

Paying someone when their service is not necessary is a perfect example of government waste, and not something we need to perpetuate. How many billions of dollars can we put towards a sophisticated industry, where even the biggest beneficiaries of the credit, including executives and wind farm operators, admit that it’s not needed? To put the cost of a PTC extension in perspective – $13
billion equals the total taxes paid by 5.48 million median-income families of four. The PTC truly is crony capitalism in its finest form.

Many members of Congress don’t realize how overly generous the wind subsidy actually is. The subsidy paid by taxpayers is 2.3 cents per kilowatt hour and is equal to about 30 to 50% of the average wholesale cost of electricity. All a wind producer has to do to qualify for 10 years of subsidy is to spend about 3% of the project.

In other words a project started in 2013 and placed in service in 2015 will be receive subsidies until 2025! Warren Buffet’s company, Mid America Energy, is
receiving hundreds of millions per year and he has stated the only reason one would build the wind facilities is for the subsidy. Even if the PTC is not extended he will continue to receive hundreds of millions for years to come. Other beneficiaries are investment bankers and foreign operations milking an overly generous subsidy at taxpayers’ expense. Over 30 years of the PTC which was supposed to last only 10 years is enough already.

Politically, the PTC is a test of Republicans’ credibility when it comes to enacting the kind of common-sense reforms this country desperately needs. The proponents of the PTC spent mega millions to elect Democrats in the Senate and House and shouldn’t be rewarded by stuffing another give away in the lame duck. If an extenders package does come to the floor for a vote, Republicans should do everything they can to ensure that the PTC is not included.

Former Oklahoma Senator Don Nickles is the chairman and CEO of The
Nickles Group, LLC. He was a member of the U.S. Senate from 1981-2005.

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