TaxProf Blog

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

Friday, June 3, 2016

Roberts: A Structural Examination Of Energy Tax Subsidies

Tracey M. Roberts (UC-Hastings), Picking Winners and Losers: A Structural Examination of Tax Subsidies to the Energy Industry, 41 Colum. J. Envtl. L. 63 (2016):

The shibboleth that “government should not be picking winners and losers” has dominated the public discourse over renewable energy subsidies. This way of framing the debate ignores the nation’s long history of support for fossil fuels and obscures the economic theory behind the subsidies. This article contributes to the discussion in four ways.

First, the article examines the situations in which government intervention in a market economy may be justified and then evaluates the tax subsidies to both fossil fuels and renewable energy resources in light of that theory. Second, the article contrasts the different market trajectories for those investments and explores possible reasons for their divergence, including their budgetary history and the political economy associated with their development. Third, the paper examines the investment incentives that arise from the subsidy structures in terms of marketability, liquidity, information costs, transaction costs, risk, and certainty. Fourth, it contrasts the two subsidies’ degree of “imbeddedness” in the tax code, the resultant administrative bias in reporting and analysis, and the differences in their stability and longevity. Finally, the article argues that the way Congress structures its subsidies can determine whether new energy technology is a winner or loser. The article develops a generalized framework for structuring tax incentives and examines several proposals for reform.

http://taxprof.typepad.com/taxprof_blog/2016/06/roberts-a-structural-examination-of-energy-tax-subsidies.html

Scholarship, Tax | Permalink

Comments

Does anyone doubt we are dealing with a failed system? All the "good intentions" social engineering biases have sucked us into a vortex from which there is no return. I say we need a complete do over. Let's eliminate all non-business deductions (Sch A), all credits for any reason, and all industry-specific tax breaks.

By all, I mean all. Energy goodies get a lot of ink. But few pay attention to the breaks awarded to intellectual property companies like Apple. It is hard to imagine Caterpillar doing a double dutch, although I'm sure they have tried.

Posted by: Dale Spradling | Jun 4, 2016 6:16:51 AM