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Letter of Support: Rep. Pompeo's Elimination of Inefficient Energy Tax Subsidies

November 07, 2011 J

Dear Representative Pompeo,

On behalf of more than 1.8 million Americans for Prosperity activists in all 50 states, I write in strong support of H.R. 3308, your bill to end the federal government’s long-standing and highly-unproductive practice of using the tax code to pick winners and losers in energy markets.

There are many reasons why our economy continues to struggle. One of the most evident is our nation’s broken tax code; it’s too complicated, the rates are too high, and there are too many exemptions, credits, and special interest giveaways that distort economic activity. For years the federal government has attempted to prop up politically-favored energy sources and new technologies that promised to be the “wave of the future.” First it was ethanol. Then it was “clean” and renewable sources like wind, solar, and biofuels. Today, some politicians are even asking for more handouts to prop up the natural gas vehicle industry. Yet these vast taxpayer-funded subsidies have done little to benefit the American economy. There’s been little change to our reliance on traditional fuels. High energy prices are still sapping much-needed resources from American families and businesses. In fact, a 2008 U.S. Energy Information Administration report showed that while federal government spending on energy subsidies doubled from FY1999 to FY2007, total domestic production remained unchanged and prices increased by more than 80 percent over that period of time.

In some cases, like ethanol, subsidized sources have actually turned out to be harder on the environment than traditional fuels. In other cases, like renewable energy, purportedly-promising innovations have fallen far short of achieving economic viability in the absence of hefty doses of government support. In each case the government’s meddling comes with unintended consequences, and the resulting harm to the economy creates the “losers” of this political game. In the meantime, taxpayer money continues to be wasted on ineffective special tax breaks.

Why have these efforts failed? There explanation is simple: government planning doesn’t work. Washington thinks it can substitute its own will for the preferences of consumers acting in the free market, but economists have demonstrated time and again that competition drives innovation, not bureaucrats and central planners. New energy solutions will emerge by offering American consumers a greater value at a lower price, not by winning handouts from lawmakers.

Your bill offers a clear and simple alternative: eliminate tax subsidies for all of the players in the energy markets, and then let the free market sort it out. Your bill repeals and eliminates tax credits and special exemptions across the board. It eliminates credits for ethanol; for “green” technologies like wind, solar, and biodiesel; for nuclear power; for electric vehicles; for hydrogen fuel cells; and yes, even for fossil fuels like oil, coal, and natural gas. The increased revenues that would result are off-set by lowering the overall corporate tax rate, leaving hard-earned dollars in the hands of the private sector where they can be used most productively. Eliminating harmful market distortions while at the same time giving companies more cash to invest would undoubtedly help grow the economy and create jobs.

Americans for Prosperity is proud to support H.R. 3308. I urge your colleagues to support its passage, and I look forward to working with you in the future.

Sincerely,

James Valvo
Director of Government Affairs
Americans for Prosperity

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