Harry Reid believed that after nearly 12 months of trying to extend these tax credits and meeting Republican opposition each and every time, that the tax extensions had to pass this time. (By the way, John McCain missed all eight votes to extend these tax incentives for solar, wind, biomass, geothermal, and energy efficiency)!
Thankfully, Max Baucus is attempting to include the renewable energy tax extenders in the bailout bill. Being that these tax credits are set to expire at the end of 2008, and that these tax credits helped generate $10 billion in renewable energy investment in the U.S. in 2007 (likely more than that in 2008), I wonder if this sweetens the pot? Can we feel a little better about this bailout if we know it will help the U.S. continue its renewable energy boom? I think so. What do you all think?
Below the flip is the Memo from Senator Baucus.
Finance Chairman Baucus issued comment this evening following the Senate's agreement by unanimous consent to attach to upcoming financial rescue legislation a Senate-passed tax measure that will create and extend incentives for renewable energy, protect 20 million Americans from paying the alternative minimum tax, and extend a number of vital expiring tax cuts for businesses and families. The Senate is expected to vote on the financial rescue plan with added tax relief tomorrow, and to send it to the House of Representatives for final consideration."I said from the beginning that the administration's original financial plan focused too much on Wall Street and not enough on Main Street, and I wanted to make it better. Adding this tax relief will ensure that regular working Americans get the financial help they need in this time of crisis. As soon as this legislation passes, good-paying jobs will open up in the green energy sector as wind and solar projects get up and running. Twenty million Americans who can't afford a higher tax bill right now will be protected from the alternative minimum tax. Families will get a break on college tuition, classroom expenses, and a little money back for all the state and local sales taxes they pay. And companies struggling to survive in this financial crisis will get tax relief to do the research and development they need to grow and offer even more good-paying jobs," said Baucus.
"I don't like the situation we're in, so I worked to improve the Treasury plan by cutting the paychecks of big financial executives, helping struggling homeowners and community banks, and protecting taxpayers from paying for Wall Street's mistakes. But adding tax relief that creates jobs, supports families, and secures a new energy future for the country makes this bill a lot fairer and a lot better for hard-working, taxpaying Americans. Senators and Representatives can know that a 'yes' vote on the financial rescue plan is now a vote to rescue America's working families from this financial crisis, with the right tax relief at just the right time."
The renewable tax incentives have been cash cows, creating billions of dollars of investment. About 7,500 MW of wind farms are expected to be constructed in 2008 alone. That will likely put wind as the number one source of new electric generation capacity. I doubt this legislation will induce nearly as much development of oil shale, tar sands, and coal-to-liquid fuels. One reason is that carbon legislation is expected next year. Another is that those are long-term solutions. The purpose of the renewable tax credits is to let them compete in the short term. Since renewables have performed so well because of the tax credits, it is certainly viable to suggest that they should be included in any piece of legislation affecting taxation. These credits are keeping a booming domestic industry afloat, while creating jobs where they are needed, tax revenues to rural counties, and building green, sustainable technology that combats climate change. If the renewable tax credits pass, these benefits happen IMMEDIATELY, not in ten years.
They need to just pass a rescue plan that gets liquidity back into the banks, protects tax payers, restructures the mortgages, gets some much needed oversight into the banking system, and prevents the executives who caused this to benefit by sailing on their golden parachutes to financial prosperity while the tax payer is left holding the bag.
Anything beyond that could be the ornament that breaks the tree's branch.
Some economists argue that using the "shock and awe" approach to jump starting the capital markets may actually do more harm than good (MIT prof Wang makes the argument link below)
Certainly the issues of accountability, transparency, and protecting homeowners via loan negotiations are also key.
We are all economists now!
Other links:
MIT
Harvard
Wharton
Northwestern University Kellogg
University of Chicago