Senate Finance Committee Hearing, Tax Reform: Impact on U.S. ...

Posted by William McGarey on Wednesday, June 13, 2012 ? Leave a Comment ?

On Tuesday June 12, the Senate Finance Committee heard testimony on how tax reform could affect change in U.S. energy policy and dependence on foreign energy. Senators Max Baucus of Montana and Orrin Hatch of Utah led the discussion by issuing member statements. Senator Baucus opened with a quote from writer Hunter S. Thompson, ?Anything worth doing is worth doing right.? Baucus emphasized that this was more relevant than ever for energy policy. ?Referring to his home state of Montana, Baucus hopes that the national energy policy can follow in its footsteps and focus more on renewable energy ventures.? He concluded by mentioning the vital importance of tax reform stating that tax incentives provide 85 percent of federal support to energy.? Senator Hatch went a more humorous route by comparing the tax code to the mythical multi-headed monster hydra that grows two more heads for each one cut off.

The Honorable Don Nickles, chairman and CEO of the Nickles Group, was first to testify. He emphasized the importance of both the House Committee on Means and Ways and the Senate Finance Committee in bringing about tax reform and his elation at the fact that there was growing bipartisan agreement on the issue of tax reform. Senator Nickles worries that the country is moving toward the type of energy policy seen during the Carter administration where the government ?picked favorites? by providing subsidies to some and not to others, suppressing competition. He believes the ideal energy policy would include neither incentives nor penalties. His full testimony can be viewed here.

Next on the witness list was the Honorable Phillip Sharp, president of Resource for the Future. He emphasized that for the past few decades, the majority of funding for energy ventures has come from the private sector with government incentives to influence consumers and investors. There are many incentives already in place and it is important for the government to continually evaluate their effectiveness. Sharp concluded by suggesting a tax reform that includes a carbon tax where the revenue from the tax is put towards reducing taxes on energy sources that hinder growth. However he warned that a carbon tax is probably not yet ready for introduction without further examination. His full testimony can be viewed here.

Third to testify was Dr. Dale Jorgenson, an economics professor from Harvard University. He presented a clear-cut list of taxes to levy on energy producers. The tax would be graduated based on carbon output and environmental and health impact with a substantial tax for coal, limited tax on oil, minimal tax on natural gas, and no tax on renewable energy. He argued this would reduce our dependence on fossil fuels with great environmental benefits as well as level the playing field for renewable energy sources that have been denied tax subsidies for so long. His full testimony can be viewed here.

Dr. Harold Hamm, CEO of Continental Records, one of the top ten producers of U.S. oil, was fourth to testify. He explained why the tax code of 1986 has been so successful to promote the independence of the oil and gas industry and should be left as is. Hamm asserted that technological advances such as horizontal drilling have allowed the U.S. to move from importing 60 percent of its oil seven years ago to just 45 percent today. Hamm finished with a plea to the committee to keep the tax code intact if we have any hope to achieve true energy independence. His full testimony can be viewed here.

When the all testimony was delivered, the committee members asked a series of questions to the panel. The committee members had a variety of opinions on the subject. A standout among the crowd was Senator Grassley who bluntly stated his opinion that it was intellectually dishonest to oppose tax incentives for renewable sources that have been denied them for so long.? Senator Baucus concluded the hearing by stating that parties on both sides of the issue have a role to play together in reforming the tax code.

I was interested to observe how the demeanor of the witnesses and committee members remained so cordial despite there being so many differing opinions. I took away from hearing a feeling of ineffectiveness because though many opinions were voiced it was hard to see a definitive change to the tax code being introduced in a timely manner. I was also disappointed to hear no mention of the Senate Masters Limited Partnership Parity Act I mentioned in my blog on Monday as it has clear relevance in a tax code hearing.

?

Until next time,

?

William

?

shuttle discovery biggest loser bonnie raitt internal revenue service intc ipad mini nfl schedule 2012