Opinion

A Retroactive Tax Increase for Renewable Energy

By Gregory Wetstone
November 8, 2017 at 5:00 am ET

If the energy provisions in the newly unveiled tax proposal are any indication, job creation and economic growth no longer matter to House leaders. The Ways and Means Committee tax bill released last Thursday (H.R. 1) includes a brazen assault on one of the nation’s most important economic drivers: the U.S. renewable energy industry. Over the past six years, the renewable sector, led by wind and solar power, has been the country’s largest source of private sector infrastructure investment. During the last two years alone, renewable energy secured almost $100 billion in domestic investment. 

Despite this growth and the accompanying record of job creation, the bill includes destructive changes to a bipartisan tax law compromise enacted in 2015, in which the wind and solar sectors became the nation’s first industries to agree to the phase down of their own tax incentives. Instead of rewarding such leadership, the House bill phases out the single permanent tax incentive on the books for renewable power, repealing the 10 percent tax credit for solar power. 

But that is just the start. With H.R. 1, House legislators have launched a no-holds barred assault on the American wind industry. This is a particularly strange decision given how important wind power has become for economic growth in red state rural areas where economic opportunities are otherwise scarce. Breaking faith with the 2015 compromise, the bill would dramatically reduce the value of the wind tax credit, despite the reality that it is already phasing down. Even worse, the bill would retroactively overturn current law and guidance on how wind projects can qualify for the tax credit. Investors and developers who complied with law and Treasury Department guidance to qualify for tax credits in 2016 are now faced with a proposal to change the rules after the fact. It is telling that this is the only retroactive measure in the entire 429-page bill. 

This is the kind of government fiat that companies normally have to worry about only in unstable developing countries, and it is having an immediate destructive impact. The energy provisions in this House plan are so destabilizing that the bill’s very introduction is killing jobs and stopping new investment — even as those who follow the legislative process understand that such outrageous provisions have little or no chance of being enacted. After all, enactment would require the approval of the Senate — where bipartisan support for renewable energy is strong.

Even so, faced with irresponsible proposals for retroactive tax law changes that undermine the economics of wind projects now under development, investors and developers are responding. To cite one compelling example, over the weekend it became clear that more than $4.3 billion in new wind energy projects approved by the Iowa Utilities Board are suddenly at risk as a result of the bill’s introduction. Slated for development by MidAmerican Energy, these new wind projects, and the 400 good-paying jobs they will create, are casualties of tax provisions that are more about disrupting the clean energy sector than reforming the tax code. Also lost to the state’s economy is an estimated $5 million royalty payment to Iowa farmers and other landowners. 

What’s happening in Iowa is only the beginning. According to the American Wind Energy Association, more than $50 billion in U.S. wind energy investment and 50,000 American jobs are at risk because of this deeply irresponsible set of energy provisions. 

It is particularly egregious that authors of the House bill have focused their cost-cutting on the dwindling temporary incentives for renewable energy rather than the array of permanent incentives for fossil fuels, which have in many cases been on the books for more than 90 years. According to the Joint Committee on Taxation, the effort to undercut renewable energy incentives will impose costs on that sector more than 65 times higher than the cost of the bill’s largely symbolic changes to fossil fuel incentives. 

It is time for House leaders to stand up for investment and jobs in America, recognizing the reality that renewable energy, with $50 billion in annual investment, is an important driver for economic and job growth that we should not curtail. Legislators should abandon the assault on wind energy and focus on a long-term plan that, at the very least, provides a level playing for all cost-effective forms of electricity production.


Gregory Wetstone is president and CEO of the American Council on Renewable Energy, a national nonprofit organization focused on accelerating the transition to a renewable energy economy.

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