WASHINGTON Jun 21, 2007 (Dow Jones Newswires)
The U.S. House Ways and Means Committee passed a $15.3 billion tax package Wednesday that would extend long-term renewable energy tax credits and provide incentives for energy efficiency.
The measure passed on a 24 to 16 vote.
Chairman Charles Rangel's, D-N.Y., markup bill pays for the package primarily by cutting more than $15 billion in tax breaks to oil companies.
"The Renewable Energy and Energy Conservation Tax Act of 2007 is a forward-thinking, responsible bill that will help America lead the way in renewable energy policy," Rangel said in a statement.
"This bill does more than simply extend existing provisions, it creates a new network of incentives for use and production of renewable energy and empowers state and local governments to promote energy-efficient policies that meet their individual needs," he said.
The measure extends renewable energy production tax credits to 2012, costing around $6.6 billion over 10 years, and extends a 30% tax credit for solar energy and fuel cell investment for eight years to 2016, costing around $563 million.
It establishes a new credit for plug-in hybrid vehicles of at least $4,000 per taxpayer, to a total of 60,000 vehicles a year, costing around $1.2 billion over a decade.
The bill outlines $2.3 billion for several energy efficiency measures, including bonds and deductions.
The chairman also called for a "carbon audit" of the tax code that would identify tax provisions that would "have the largest effects on carbon (dioxide) and other greenhouse gas emissions and estimate the magnitude of those effects."
Many academics and economists say a tax on carbon dioxide emissions would be more effective and transparent, and would allow for more equitable distribution of the burden of cutting greenhouse gas emissions than the cap-and-trade policy that currently has political momentum on Capitol Hill. A cap-and-trade policy would cap pollution levels and allow emitters to buy and sell emission credits based on whether they were above or below their set levels.
In terms of funding the spending, one measure raises $11.4 billion over 10 years by denying a manufacturing tax deduction for major integrated oil companies' domestic energy production. This is known as the "Section 199" tax deduction.
"The domestic production deduction replaced an export subsidy that had been declared an illegal trade subsidy by the World Trade Organization," Rangel said in the statement.
Another measure raises $3.56 billion by modifying foreign income rules for certain oil and gas sales or production.
The ranking Republican on the Ways and Means Committee, Rep. Jim McCrery, R-La., opposed Rangel's markup bill, primarily pointing to the cut in oil companies' tax breaks.
"If our goal is lower gas prices for the American people and less dependence on foreign sources of energy, this is precisely the opposite of an effective policy," he said in a memo to Republican members on the committee.
McCrery also targeted $5 billion in bonds for so-called green energy projects such as alternative energy and conservation.
"The legislation is drafted so loosely that this money is destined to become 'green pork' doled out to governors, state legislatures, mayors, and city councils to fund all manner of boondoggles and white elephants," he said.
McCrery asked a series of questions to staff of the Joint Committee on Taxation that illustrated the bond program, in theory, could be used for purchase of hybrid snowmobiles in Aspen, Colo., or perhaps to allow former Vice President Al Gore to retrofit his house to be more energy efficient.
"Certainly the way the bill is drafted, there are all sorts of haphazard and inefficient things that could be done in the name of conservation and creation of a better energy policy for this country," McCrery said.
Rangel thanked McCrery for the questions and suggested the committee would further tighten the tax credit bond program.
"It was our thinking that government didn't have all the answers, that one size didn't fit all," Rangel said, adding the program would give governors and mayors discretion to best use the funds. "Our intent is to really get big government out of the decisions, that local people seem to have the answers better.
"We'll keep doing it until we get it right," he said.
American Petroleum Institute spokesman John Bisney said the House bill's new taxes on U.S. oil and gas companies "would hurt energy consumers and threaten U.S. jobs by discouraging investment in both new production and expanding refinery capacity.
"While promoting using alternative energy resources is a worthy policy goal, doing so by imposing new taxes on our industry will not help supply the stable and affordable supplies to meet the growing needs of American consumers.
"The unfortunate result would be to make the U.S. more dependent on imported oil, since domestic production would be impacted," he added.
The API pointed to a Congressional Research Service report that found when the windfall profits tax was implemented between 1980 and 1986, domestic oil production dropped by as much as 1.26 billion barrels and oil imports increased by as much as 13%.
On Tuesday, the Senate Finance Committee passed an energy tax package that would see oil companies paying for much of the nearly $30 billion to encourage clean and alternative energy technologies.
Copyright (c) 2007 Dow Jones & Company, Inc.
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