HeinOnline is a subscription-based resource containing thousands of academic and legal journals from inception; complete coverage of government documents such as U.S. Statutes at Large, U.S. Code, Federal Register, Code of Federal Regulations, U.S. Reports, and much more. Documents are image-based, fully searchable PDFs with the authority of print combined with the accessibility of a user-friendly and powerful database. For more information, request a quote or trial for your organization below.
![handle is hein.taxfoundation/iretcgadv0115 and id is 1 raw text is: August 20, 2001 No. 118
GOOD AND BAD TAX PROVISIONS
IN THE ENERGY BILL
The House of Representative's
H.R. 4, which contains much of the
proposed by the Bush Administration.
has passed
energy plan
Ahead lies
On the negative side, a theme underlying many
of the tax provisions is that the government knows
better than individuals acting through free markets
what to produce and consume. Attempts to
influence people's behavior are most evident in
provisions concerning energy conservation and
alternative fuels. Four examples are a proposed
15% tax credit for certain residential solar energy
expenditures, a 10% tax credit for qualified
investments in clean-coal facilities with an
additional tax credit for production from those
facilities, a 10% tax credit for certain stationary
fuel-cell power plants, and an extension and
expansion of tax credits for alternative-fuel vehicles.
These provisions are politically popular and have
received little criticism.
One of the few such items to raise eyebrows is
Senate consideration, and if the Senate apprc
energy bill, a House-Senate
conference. The
Administration's energy Notwith
blueprint emphasizes both appeal o
production and conservation, other in
and it looks to tax relief and raising
incentives to achieve some of the goi
its goals. As the energy plan more co
emerged from the House, it world
includes among its provisions warrant,,
tax changes with an estimated directio
10-year revenue cost of wastefu
$33.5 billion. resource
use of e
Are the tax provisions of up mor1 e
H.R. 4 sensible? Some are and con
consistent with good tax policy $1 of en
and a reformed tax system.
Others are not. One advantage
is that all the provisions would cut taxes.
)ves an
standing
.' green
centives.
a proposed credit
the political
tax credits and
[b]y artificially
enerigy prices with taxes,
'einent already forices
nserv ation than the real-
availability of energy
. Additional steps in this
1 would induce us
ly (in terms of total
s) to curtail further our
Fzergy; we would be giving
than $1 of other resources
stumer satisfaction to save
ergy resources.
That
credits and other
to washing machine and refrig-
erator manufactures for selling
energy efficient machines.
The federal government, with
the approval of these
manufacturers, recently
mandated appliance standards
that will reduce energy use but
sharply raise prices for
washing machine and
refrigerator buyers. The credit
would offset some of the
additional cost, preventing the
drop in appliance sales caused
by the government mandate
from being as great as
otherwise.
Notwithstanding the
political appeal of green tax
r incentives, a key economic
would slow the growth of government by leaving
Washington with less taxpayer money to spend.
(This advantage would be lost, of course, if revenue
offsets should be added later to the bill.)
principle should be kept in mind: people acting
through voluntary exchanges in response to
undistorted free-market price signals are usually
better than those in government at making
Institute for
Research on the
Economics of
Taxation
IRET is a non-profit, tax exempt 501(c)(3) economic policy research and educational organization devoted to informing the
public about policies that will promote economic growth and efficient operation of the free market economy.
1730 K Street, N., Suite 910, Washington, D.C. 20006
Voice 202-463-1400 9 Fax 202-463-6199 0 Internet www. ret.org](ViewImageLocal?handle=hein.taxfoundation/iretcgadv0115&div=1&collection=&method=preview&ext=.png&size=3)