It is time for our leaders in Congress – the ones lifted into power by a conservative wave – to take a bold, principled stand and put an end to energy subsidies. These subsidies distort private sector investment, waste taxpayer dollars, and allow the government to pick winners and losers. The subsidies exist not because they work, but because of the corrupt nexus between the Washington Establishment and the Bigs - Big Wall Street, Big Government, Big Labor and Big Business.
By one estimate, the direct cost of energy subsidies to taxpayers is $18.6 billion per year. Subsidies can take on various forms: direct payments, mandates, loan guarantees and tax gimmicks. Since comprehensive tax reform is a hot topic in Washington and around the country, let’s focus on the energy tax subsidies.
Here are just a few examples:
A $1.00 per gallon subsidy for biodiesel blenders for pure biodiesel, agri-biodiesel, or renewable diesel blended with petroleum diesel;
An additional $0.10 per gallon subsidy for small agri-biodiesel producers;
A $0.50 per gallon subsidy for various liquefied alternative fuels, which includes natural gas, petroleum gas, biomass and others;
A $0.50 per gallon subsidy for mixing various liquefied alternative fuels;
A $0.45 per gallon subsidy for ethanol blenders;
An additional $0.10 per gallon subsidy for small ethanol producers; and,
A $2,500 to $7,500 subsidy for purchase of qualified plug-in electric vehicles.
The list of subsidies goes on…and in the near future, Congressman Mike Pompeo (R-KS) will introduce legislation to end these and many other energy tax subsidies.
Slowly but surely, good conservatives inside Washington are standing up and taking wasteful energy subsidies head on. Earlier this year, nearly thirty conservative organizations, including Heritage Action for America, sent a letter to Congress saying it was time to end energy subsidies.
Congressman Pompeo introduced a resolution declaring it was time to “end all subsidies aimed at specific energy technologies or fuels.” Congressmen Tom McClintock (R-CA), Raul Labrador (R-ID) and Tim Huelskamp (R-KS) joined the effort and many more voiced support.
Of course, the lobbyists, accountants, politicians and bureaucrats who comprise the Washington Establishment have a stake in maintaining the status quo, which they are able to manipulate to their advantage. For that reason, big, politically connected energy interests will fight tooth and nail to keep their handouts.
We know about Solyndra, but just look at John Bryson, President Obama’s new Secretary of Commerce. He is the founder of the radical environmental group Natural Resources Defense Council and was most recently the chairman of BrightSource Energy’s board. BrightSource is a California-based solar company that received a $1.37 billion loan guarantee from the stimulus.
It’s an anecdote that perfectly captures the problem with the Washington Establishment. By going after energy subsidies – even just the expiring tax subsidies – lawmakers could demonstrate a seriousness of purpose, a real determination to ending the status quo and bringing about a flatter and fairer tax code.
The Heritage Foundation explains the importance of an improved tax code. Tax cuts spur economic growth because they reduce “government's influence on economic decisions and allowing people to respond more to market mechanisms, thereby encouraging more productive behavior.”
History is our guide. President Reagan’s tax cuts ushered in seven years of uninterrupted economic growth that saw the creation of nearly 20 million jobs. In the six quarters before President Bush’s 2003 tax cuts, economic growth was a paltry 1.7 percent. In the six quarters after, the growth was 4.1 percent.
For job-creating tax reform to become a reality, lawmakers must be willing to take on the corrupt nexus between the Washington Establishment and the Bigs. Of course, the current political dynamic in Washington will not allow for the type of fundamental tax reform our country needs as President Barack Obama and his allies in the Senate are totally committed to a class warfare strategy that divides the country by taxing success.
But that does not mean our leaders in Congress should back away from the legislative fight. If lawmakers really want a flatter and fairer tax system, they have to be willing to take on special interest subsidies. By taking on energy subsidies, they can show American people they are principled and committed.
To be clear, enacting comprehensive tax reform jeopardizes the very existence of the Washington Establishment. We can jumpstart that process by ending energy subsidies.