Oregon Reconsiders Green Incentives

February 11, 2010

In Oregon:

“Lawmakers took the first big step today to corral Oregon’s runaway incentives for wind and solar energy projects with a nearly unanimous vote by the House to reduce the tax breaks and tighten the rules on who gets them.

House Bill 3680, approved on a 59-1 votes, sets a limit on how much the state can spend on renewable energy projects — $300 million in 2009-11 — and phases out incentives for wind farms.

In all, the changes to the Business Energy Tax Credits are expected to save the state an estimate $55 million in the current two-year budget and as much as $500 million over the next several years.”

The bill is expected to pass the Senate. Right on, Oregon. Tax incentive programs—especially for the hyped renewable energy sector—often promise to pay for themselves in future tax revenue or jobs. But after business costs are dropped for politically favored industries, those promises are rarely checked up on. The first step could be a cap on incentives. Another good step would be to have public investigations on the benefits of those incentives (if the state does not already do so). The best step would be for state governments to treat businesses equally—expand bases and lower rates.

A good that might come out of this recession is that states slice tax incentive fat from their budgets; getting rid of exemptions that distort markets and don’t pay dividends. Georgia might be stepping that way. Currently there is a bill in the Georgia state legislature that would require politicians to investigate the benefits of expensive tax credits:

“Georgia gave up an estimated $265 million from the years 2004 to 2006 to encourage businesses to do things like create jobs.

According to a 2006 report out of the Georgia Department of Audits and Accounts, the state had no way of telling if it helped Georgia back then.

…’The state at the present time does not have a reporting mechanism or an evaluation mechanism,” says Hinton, “as to seeing whether or not those benefits are accruing to the state.'”

All states should at least seek to know the benefits and costs of incentive programs. Having a report to point to instead of anecdotes is a good way to argue for better tax policy.


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