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Congress Takes Up Energy Tax Legislation: Déjà Vu All Over Again?

2 min readBy: Gerald Prante

Today, the Senate Finance Committee passed a measure that would provide more taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. incentives for renewable energy while at the same time imposing heavy taxes on petroleum-based products. From Delaware Online (via AP):

A proposal to hit oil companies with $29 billion in new taxes advanced in the Senate on Tuesday, targeting the money to energy conservation, wind turbines, electric hybrid cars and “clean coal” technology.

The massive tax package, double what Democrats had talked about as recently as last week, is “designed to promote clean and sustainable energy,” said Sen. Max Baucus, D-Mont., chairman of the Finance Committee that approved the measure by a 15-5 vote.

It will be added to energy legislation being considered by the full Senate.

Senators acknowledged that oil companies would howl over the new taxes.

But Sen. Chuck Grassley, R-Iowa, said, “We have entered a new era in energy markets … [that] requires a dramatic shift away from tax incentives for oil and gas production” and toward support for other energy sources and efficiency.

Two years after the debacle that was the Energy Bill of 2005, which was supposed to be landmark legislation to solve our energy problems, Congress is once again using fiscal policy to try to control energy markets. There is little doubt that the initial special tax provisions for oil companies that were passed in 2005 were bad policy, but will repealing those special provisions or imposing additional taxes on these companies in order to fund other projects that legislators deem worthy of funding (through the tax code) really solve the supposed “energy problem” that America faces? We doubt it.

Senator Grassley’s statement should instead read: “We are continuing the 30-year old era of energy markets where government tries to solve the current perceived problems in the energy market only to come back a few years later and try to solve that same problem again, while also solving a new problem that was created by our trying to solve the earlier problem.”

Remember that classic Pulitzer Prize-winning cartoon by Jeff Macnelly that jokingly put a question on his mock-1040 asking “Have you rotated your tires lately?” with a box next to it saying “If No, File IRS Tire Rotation Schedule L.” It was a joke in 1977. But who knows? Since rotating tires improves fuel economy, it may become tax incentive number 6,327 in the next energy bill.