Sen. Max Baucus (D-MT), the Chairman of the US Senate Finance Committee, released new details of his tax proposal today. Here’s the line from the National Journal story that stuck out to me: “The cleanliness of the generation technology determines the size of the credit,” a staff summary states.
His plan would jettison incentives that have vocal political constituencies, such as oil companies and electric vehicle and efficiency advocates. But his office hopes to attract support because the proposal saves money compared to extending the current patchwork of energy incentives, and the plan is part of wider tax code overhaul efforts that would lower corporate rates.
According to a summary of the energy plan, more than three-dozen current incentives–including 25 temporary measures that expire every year or two—would largely be replaced with two primary incentive programs for electricity and motor fuels.
For new electricity projects, the plan creates a “technology neutral” sliding credit for producing power that’s at least 25 percent less carbon-intensive than the national average. The 10-year credit would be available for projects that use any type of fuel—renewable, nuclear or fossil energy—as long as they’re clean enough.
Sounds like more of the government picking winners and losers in the market to me…
Politico’s Morning Energy previewed today’s announcement with this:
What likely won’t be in today’s paper: Details are unclear, but the oil industry doesn’t see many more tax incentives that Baucus could target for elimination or reduction in Wednesday’s draft. The Montana Democrat’s earlier discussion draft already targeted just about the full suite of the industry’s prized incentives by cutting back on accelerated depreciation tax breaks taken by all kinds of companies. That includes repealing the “last in, first out” accounting method; a deduction for intangible drilling costs; percentage depletion for oil and gas wells that major integrated oil companies don’t use but which smaller, independent companies do; amortization for geological and geophysical expenditures; and a deduction of the costs for injecting carbon dioxide and other “tertiary injectants” to enhance the recovery of oil and gas in certain older fields. “We’re not anticipating sort of a round two in what he releases tomorrow,” one oil industry official predicted to POLITICO. Indeed, about all that’s left is the use by oil and gas companies of a broader section 199 domestic manufacturing tax credit.
What’s more likely to be in it: Baucus may end up focusing today’s discussion draft on either helping, modifying or hindering tax incentives for green energy and efficiency. One rumored possibility is that he may propose extending some efficiency incentives, while allowing others to come off the books. “You’ve got to placate multiple sides in this thing,” said Suzanne Watson, policy program director for the American Council for an Energy-Efficient Economy. “We may need to help, if you will, in better communicating the value of certain [incentives].”
Meanwhile, Karen Kerrigan offers this commentary for Roll Call: Don’t Allow Small Business to be Caught in Tax Reform Crossfire
Here’s an excerpt:
This spring my organization, the Small Business and Entrepreneurship Council, released an analysis examining the role of small business in the nation’s oil and gas industry. We found that the vast majority of firms engaged in the energy sector or in service of the sector are small businesses, most with 20 employees or less. Whether in extraction, operations, construction or machinery manufacturing, the numbers paint a clear picture. These firms grew faster than businesses in most other sectors and experienced robust employment growth. New business formation in oil and natural gas has been significant.
The effect of the tax hikes will drive down new exploration and development initiatives, making such activities far less cost-competitive. They’ll make it that much harder for American companies to keep pace overseas and, therein, bring profits back home.
Outside of the firms large and small and the employees who will be directly impacted by tax hikes on U.S. oil and gas companies, such increases also mean higher energy prices across the board — including for small businesses.
In other news, Democratic US Senate candidate Dirk Adams (D-Wilsall) says he opposes the Keystone pipeline:
— Dirk Adams (@AdamsForMT) December 18, 2013