The Taxonomist

Earlier this year, soaring gasoline and electricity prices had
much of the public outraged at villainous energy profiteers. So, after careful
study, the Johnny-one-notes in Washington, D.C., who run the Republican Party
concluded that there are only two sensible responses to that particular (albeit
since-subsided) "crisis": drill for oil in the Arctic National Wildlife Refuge
and cut taxes on oil companies and utilities.

In August the House passed its version of the Bush energy plan--aka
another tax-reduction bill--pretty much on a party-line vote. Republican
spinmeisters, who always seem eager to deny the reality of what they're actually
doing, insist that the bill is well-balanced, with 37 percent of the new tax
breaks allegedly going to encourage conservation, 39 percent to help ensure
energy "reliability," and a mere 24 percent for "production" incentives.

Well, that's one way to look at it--if, for instance, you're willing to
characterize "investment and production credits for clean coal technology" (that
is, subsidies for using some of the most common modern methods of burning coal)
as "conservation" measures.

To set the record straight, here's a tally of the actual breakdown of the
$33.5 billion that President Bush and House Republicans want to spend on
energy-related tax reductions over the next 10 years.

Almost half of the new tax breaks--$16.2 billion--would go to oil, gas, and
coal companies. A study released last fall by the Institute on Taxation and
Economic Policy found that oil-and-gas was the nation's lowest-taxed industry,
having paid an effective income-tax rate of only 5.7 percent in 1998. The
oil-experienced Bush administration apparently thinks this is so lovely that it
wants to make sure the industry's rock-bottom ranking doesn't change in the

Another quarter of the tax cuts, some $8 billion over 10 years, is slated to
go to utilities. Oddly, most of that is designed to make it cheaper for utility
companies to sell or close down their power plants.

The remaining 28 percent of the tax breaks--$9.2 billion--is directed at a
grab bag of heavily lobbied activities involving alternative fuels and, arguably,
conservation. Companies that generate electricity from wind, garbage, and chicken
poop would get $2.4 billion, extending subsidies that date back to the Carter
administration (don't these "infant" technologies ever grow up?). Another $2.4
billion would go to purchasers of electric or hybrid cars and trucks.
Environmentalists, whose bid for higher mileage standards for SUVs in the energy
bill was rejected, have decried these new tax breaks as largely targeted to
gas-guzzling vehicles such as DaimlerChrysler's upcoming Dodge Durango hybrid
SUV, which is scheduled to hit showrooms in 2003 (at an estimated 18.6 miles per
gallon). Completing the list are $2.2 billion to reward some popular
energy-efficient building techniques; $1 billion for railroads and commercial
river freight; $0.3 billion to Maytag, General Electric, Whirlpool, and
Frigidaire for speeding up compliance with an already mandated requirement for
less-energy-hungry refrigerators and washing machines; $0.3 billion for
facilities that produce heat and power at the same time; and $0.6 billion for
installing still-sadly-uneconomic solar-energy panels.

The bottom line, you will note, is that almost three-quarters of the total tax
cuts in the House energy bill are giveaways to oil, gas, coal, and utility
companies. That's triple what the measure's sponsors spuriously claim would go to
"production." And the rest of the plan--generally enriching businesses for doing
what they'd do anyway--isn't much to write home about either.

House Democratic leaders correctly condemned the GOP energy bill as
environmentally unsound, excessively complicated, and unaffordable in light of
the huge Bush tax cuts passed earlier this year. But the Democrats then allowed
that they'd accept all the special-interest boondoggles so long as they were paid
for by raising taxes on somebody else. Aaargh!

Let's hope the Senate will simply kill this abomination when it considers it
in September.

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