Two things never really die: zombies and government programs.
One example of this is the solar investment tax credit, which came to life in 2005 with the purpose of getting the emerging solar industry to compete in the market by 2015, when the tax break would wind down. It was renewed in 2015 and is now finally set to wind down in 2021.
Efforts led by renewable energy lobbyists have breathed new life into the program, which could be extended again at the end of the year.
At the federal level, Congress is responsible for authorizing incentives, including the solar investment tax credit. The credit — which was reauthorized in 2015 for solar photovoltaics, solar water heating, solar space heating and cooling, and solar process heat — provides a 30% tax credit to systems that begin construction before 2020 in residential and commercial properties. The credit is scheduled to decrease to 10% beginning in 2022 and will apply only to commercial projects.
As the wind-down of the tax incentive package was set to begin, a Senate Democrat from Nevada and congressmen from states along the East and West coasts have submitted an extension that would last an additional five years.
The last extension occurred in 2015 under a Republican-controlled Congress, which agreed to extend the solar investment tax credit in exchange for allowing crude oil to be exported for the first time since 1975.
The end-of-year “tax extender” season appears likely to produce a legislative Christmas tree where just about everything is added to the package.
Despite industry agreements with lawmakers that the last extension would begin to expire in 2015 and be completed by 2022, longtime green allies are pushing for an additional extension. The wind energy folks have backed their counterparts in the solar industry in hopes of protecting their offshore wind tax credits.
When solar energy was an emerging market, perhaps encouraging investment through tax incentives was a positive thing, but today, solar energy for home and business use is a competitive, obtainable product.
Would anyone argue that the solar energy industry is still in its infancy?
Research indicates that solar will surpass natural gas around the world by the early 2020s on a levelized cost of energy basis.
Solar energy experienced explosive growth from 2010 to 2016. According to GTM Research, annual installations grew from 849 megawatts in 2010 to more than 15,000 megawatts in 2016, a record-breaking year when the U.S. solar market nearly doubled its annual record for installations. While tax incentives are factored into the growth, efficiency and affordability have driven it.
Renewables comprised more than 18% of total U.S. electric generation and accounted for more than one-third of all new generating capacity in 2018.
Large pools of individual, small-scale, distributed solar systems have raised billions of dollars in private equity capital. The markets are already picking the winners and losers in the industry. They don’t need a tax credit.
Conservatives and liberals should agree that clean energy tax breaks are regressive and that research has shown most green energy tax breaks ultimately go to wealthy Americans.
According to tax return data, the bottom three income quintiles have received about 10% of all credits, while the top quintile has received about 60%. This data point alone led Vox.com, a liberal media outlet, to call clean energy tax credits regressive even to other tax credits and incentives.
The private equity investment would be coming to the industry regardless of the tax incentives. Therefore, our government is giving an even better deal to investment bankers and hedge fund operators.
By opposing reauthorization of the credit, Republicans would be standing up for two key tenants of conservative ideology: a stronger fiscal state of the country and keeping the federal government from picking energy winners and losers.
Many states offer tax incentives for solar-based investment in your home or business. Conservatives, for most of recent history, believed the states were the place for these types of tax and energy decisions.
Additionally, one important goal of the Republican-led tax bill passed in 2017 was to close loopholes and make the tax code easier and fairer across the board, with the goal of it ultimately being a middle-class tax cut. The solar investment tax credit accomplishes none of those things.
At the end of the day, this credit has existed for 15 years. The industry has more than received the help it claimed it needed in 2005 and has become not only a viable alternative but also a profitable and increasingly affordable energy option.
We are getting dangerously close to subsidizing a profitable industry for an unknown amount of time with a very narrow and wealthy constituency benefiting from the tax breaks.
Capitol Hill Republicans should finally end this tax credit.
⦁ Matt Mackowiak is president of Austin, Texas, and Washington-based Potomac Strategy Group. He’s a Republican consultant, a Bush administration and Bush-Cheney reelection campaign veteran and former press secretary to two U.S. senators.
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