Congress Continues to Stall on Renewable Energy Tax Credits

Submitted By Trader Mark
Quite amazing really - this never ending saga, as country after country throughout the industrialized world sprints ahead. The amount of money being debated is so minimal compared to the average pork barrel that is latched onto bills in the dead of the night, that this "fight" is simply pathetic.

Congress is putting the short-term future of renewable energy companies in jeopardy even as the presidential candidates and most lawmakers hail windmills, solar panels and biofuels as long-term solutions to high gasoline prices and global warming.
Some $500 million in investment and production tax credits will expire Dec. 31 unless Congress renews them. Without that help, solar and wind power companies say they will reverse planned expansions and, in many cases, cut payrolls and capital investment.
Schott Solar has visions of quadrupling its operation in Albuquerque, N.M., to reach 1,500 jobs and $500 million in investment. But the investment tax credit, company spokesman Brian Lynch said, is what makes solar power cost-competitive. Without it, expansion plans must be reconsidered. "We don't want to build a giant factory that the market doesn't need or want," Lynch said.
The Solar Energy Industries Association says some 20 utility-scale solar power plants, many in California and together capable of producing power for a million homes, are at risk because of the uncertainty in Congress.
Proponents of wind power, a nascent industry that relies on skittish investors, are in a similar predicament. Greg Wetstone of the American Wind Energy Association says his group is predicting a loss of 76,000 jobs and $11.4 billion in investment if Congress allows its production tax credit to expire.
"Investors like to know what tax policies apply when they are putting millions of dollars down on a project. There's a pretty clear history that these projects are less likely to go forward without a credit," he said.
Congress let the credit expire in 2000, 2002 and 2004. In those three years, wind capacity installation dropped 93 percent, 73 percent and 77 percent, respectively, from the previous year.
Navigant Consulting, which advises on renewable energy technology, estimated that investments in wind and solar power in 2009 would amount to $26.6 billion with the credits; that would fall to $7 billion without them.
The credits are expected to total $334 million, according to congressional estimates.
GOP lawmakers are protesting efforts to offset the costs with other taxes or other items attached to the proposals. In the House, conservative Democrats promise to block any extension that adds to the deficit.

On a related issue and more to the "big picture" of global competition

The biggest concern for high-tech companies and manufacturers is the research and development credit, which expired at the end of last year. The credit has been allowed to expire 13 times since it was adopted in 1981. One repercussion, said Monica McGuire, executive secretary of the R&D Credit Coalition, is that more companies are taking their research dollars overseas.
"It's a global race for R&D dollars," she said, and the odds are not good when at least 20 developed nations offer tax incentives and the United States currently has nothing.

So you see how our leadership is literally undercutting the country at it's knees, especially in this newly flat world where capital will flow where it is treated best.

Last, why are there dates on tax breaks at all? Ah, I'm glad you ask - another way to hide our true structural deficits you see... rarely is a tax break given, retracted - so when the bill is sold we are told about the "limited" effect on the long term debt. Then X years later when its time for renewal most of these giveaways are extended (except apparently the renewable energy tax credits) it can add to our debt load without fanfare. In the end, giving away the store is a lot more popular political move (promise people everything) than fiscal responsibility (acting like an adult)

Putting expiration dates on tax breaks is a useful budget gimmick for lawmakers seeking to mask the growing federal budget deficit.
Because they are set to expire at a certain date by law, they do not count as revenue losses after that date even though most people assume Congress eventually will act to extend them. The Bush tax cuts of 2001 and 2003 are the biggest extenders of all in this respect. Trillions of dollars will be added to the federal debt if Congress chooses to make them permanent after they are set to expire in 2010.

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