TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Wednesday, February 6, 2013

Tax Reform to Advance Energy Efficiency

ACEEEAmerican Council for an Energy-Efficient Economy, Tax Reforms to Advance Energy Efficiency:

At the beginning of President Obama’s second term, tax reform has become a frequently-cited concern. Both Democrats and Republicans are supporting tax reform and actual work on legislation is likely to begin in 2013. Key elements of reform are likely to include simplifying the tax code in some respects and reducing marginal tax rates by eliminating many credits and deductions.

Tax reform provides us with an opportunity to remove barriers to efficiency investments imbedded in the current tax code and to use the tax code as a tool to support energy efficiency in the future more than current provisions do. In this report, we suggest policies in six areas that could be used to encourage energy efficiency: existing energy efficiency tax incentives; depreciation; low-cost strategies for promoting investment in manufacturing; fees on emissions; treatment of expenses in business taxes; and ending or reducing subsidies for fossil fuels. We propose several policy options designed to encourage investment in energy efficiency that may be used as a starting point for future tax policy discussion.

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X wants changes in the Code to help promote social cause Y which, just coincidentally, helps promote X's business. And why not? Because a major need for tax reform is because prior Xs have done just that and thereby made the Code a horrible mess. Tax reform's chief goal should be neutrality--mostly unachievable, of course, given the factors at play. It's still a better goal than trying to change behavior indirectly through the Code.

Posted by: daniel | Feb 7, 2013 5:21:09 AM