- - Tuesday, November 5, 2019

The line between an appropriate government investment and crony capitalism is often hard to see. Sure, the American people need roads and bridges — plus, improved infrastructure can increase productivity, commerce and tax revenues, paying for itself. On the other hand, many government-funded bridges lead to nowhere.

But sometimes, crony capitalism— hiding under the shroud of “investment” — is very, very easy to see.

That’s the case with the Solar Investment Tax Credit (ITC), which has given the emerging solar industry a 30 percent tax credit for new construction on systems that performed solar water heating, solar space heating and cooling, and solar process heat. Started in 2005, the timetable for the ITC was 10 years: give the industry a jolt, then let the tax break would expire. Regardless, Congress renewed the ITC in 2015 with an extension through 2021.

And if the for-profit environmental lobby has its way, it will never expire — even though the industry no longer needs them to be viable.

Solar energy enjoyed spectacular growth between 2010, when annual installations were just 849 MW, and 2016 — when installations rose to 15,000 MW, nearly doubling the annual record. The tax credits no doubt helped stimulate innovation, but technological improvements and market forces were the driving factors. Renewables generate nearly 20 percent of total U.S. electricity and more than one-third of new generating capacity. Large pools of retail solar systems have raised billions in private equity. Furthermore, indicators point to solar out-competing natural gas around the world in just a few years.



The industry is mature enough it doesn’t need the government to pick winners and losers anymore.

Moreover, while the market is now developed enough that solar can compete with traditional energy sources, those who benefit from these kinds of tax credits are — to borrow a phrase — the ones who need it the least: The very rich.

Green energy tax breaks go to the very wealthy — those who can afford the stylishness of a Tesla and cluck their tongues at those who can’t. It reminds one of the classic South Park episode where hybrid cars release so much “smug” into the air that a toxic cloud forms over San Francisco.

Indeed, researchers at University of California, Berkeley, found that the bottom three income quintiles receive about 10 percent of all credits, while the top quintile hoards 60 percent of them. The average cost of a typical 6-kilowatt residential rooftop photovoltaic system was about $22,000 — not something the average family of four in Dayton, Ohio, can afford.

The jarring reality of this, of attempted environmentalism reinforcing socio-economic inequality, forced the media outlet Vox to call clean-energy tax credits regressive. This is particularly bad for renters: Landlords have no incentive to upgrade their facilities since renters pay for their own utilities, and no renter is going to make major investments in a property they do not own. 

Furthermore, Republicans need to get serious about the benefit of selective tax cuts. The Trump tax cuts are driving the unprecedented growth of the past few years, but — since there have not been commensurate spending cuts — they’ve driven the debt as well. It’s now at $22 trillion.

For every $22,000 photovoltaic system described above, the federal government was not collecting about $6,600 in tax revenue. One imagines that the super-rich, East Coast-educated, double-income-no-kids, arugula-eating, fair-trade coffee-drinking Bernie Sanders supporters who benefit from this credit would be happy to “pay their fair share.”

The 2015 extension was a concession to Democrats to open U.S. crude oil for exportation for the first time since 1975, and now we’re net oil exporters for the first time in 75 years. That was a good deal. This one is a product of collusion with the wind-energy folks who want to protect their own offshore tax credits. There’s no reason to take this deal this time.

Coastal Democrats are pushing to extend the ITC, and Republicans need to push back. By opposing this reauthorization, Republicans would be championing a stronger fiscal state of affairs and keeping the federal government out of a developed market. The president’s Tax Cut and Jobs Act eliminated most itemized deductions, simplifying the tax code as has long been a goal.

Let’s not allow the for-profit environmental lobby to poke any new holes in it. 

• Jared Whitley has worked in the White House, the U.S. Senate, and the defense industry.

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