Stable tax policy is fundamental to business investment and growth, writes Hoover Institution senior fellow John B. Taylor in a recent Wall Street Journal opinion article. Mr. Taylor offers some additional thoughts we don't necessarily endorse, but on this point, we're in strong agreement (see, for example, “Fact check: Heritage errs in supporting job-killing tax hike,” Dec. 19).
In our case, of course, the wind power industry is seeking a multi-year extension of its key incentive, the Production Tax Credit (PTC), which lowers taxes on companies that operate wind farms based on the amount of electricity they produce. While Mr. Taylor is speaking more generally, he does an excellent job of explaining the importance of stable tax policy:
“Some claim that … policy unpredictability is not a problem, arguing that an obvious lack of demand rather than policy uncertainty is holding the economy back. But demand is low in part because firms are reluctant to hire workers or invest long term not knowing what tax rates and other provisions will be. Demand for investment will increase if policy unpredictability is reduced.“
In recent years, he adds, Congress has increased the number of tax provisions subject to short-term expiration and extension, in the process adding to policy uncertainty that is a drag on the economy.
While Mr. Taylor is speaking on the macro level, the wind power industry offers an excellent case study of an expiring tax incentive and its impact in the real world. According to a recent study by Navigant Consulting, allowing the PTC to expire and raising taxes on wind energy will cut American wind manufacturing jobs by one-third, while private investment in the industry will drop by nearly two-thirds. The study also found that with stable tax policy, the wind industry can grow to nearly 100,000 American jobs in the next four years – including an increase in the wind manufacturing sector by a third, to 46,000 American manufacturing jobs. This will keep the wind sector on track to support 500,000 jobs by 2030, as projected by the U.S. Department of Energy during the George W. Bush administration.
Job losses are already beginning and will accelerate with each month Congress allows the PTC to move nearer to expiration. The incentive has already effectively expired for the wind manufacturing sector, as PTC uncertainty is making businesses hesitant to plan future U.S. wind projects. American wind manufacturers have essentially zero orders for 2013, and layoffs in companies that develop wind projects have already started. Therefore, Congress must act now.
Bipartisan legislation (H.R. 3307, the “American Renewable Energy Production Tax Credit Extension Act”) recently introduced by Representatives Dave Reichert (R-Wash.) and Earl Blumenauer (D-Ore.) seeks to extend the wind energy PTC for four years. This legislation has garnered the support of 45 cosponsors, including 11 Republicans. A vote for a PTC extension is a vote for growing clean, homegrown, affordable energy resources and badly needed new American manufacturing jobs. Thanks to Congressmen Reichert and Blumenauer for realizing this and for their national leadership on this vital issue.
Will Congress give gift of wind power jobs to Americans or foreign countries?, January 3, 2012
Fact check: Heritage errs in supporting job-killing tax hike, December 19, 2011
Fact check: Globalwarming.org ignores energy incentive history, December 19, 2011
Blogger sees PTC extension as 'no-brainer', December 15, 2011
Don't hit wind with job-killing tax hike, December 5, 2011
Fact check: Pompeo and Labrador miss mark with subsidy bill, December 1, 2011
Selective Use of Energy Subsidies is Unfair (letter to editor, Washington Times), November 30, 2011
Red State Energy, Red State Jobs, November 29, 2011
Governors' letter urges prompt extension of wind tax incentive, November 16, 2011
Wind power: Keeping America's lunch money at home, November 14, 2011
Clean energy: A bipartisan goal, November 9, 2011
Nonpartisan Congressional report underscores need for stable wind energy policy, October 3, 2011
Iowa Gov. Branstad cites wind jobs, current and future, September 14, 2011