Let's Nuke Government Subsidies for All Forms of Energy

Ronald Reagan, who left office 30 years ago, used to say that the big government approach to the economy could be summed up in three simple phrases: If it moves, tax it; if it keeps moving, regulate it; and if it stops moving, subsidize it. In some respects, Reagan's view of government was too optimistic.In practice, government often ends up trying to encourage and discourage the same activity at the same time through a patchwork of taxes, subsidies and regulations. And when a subsidy to one company ends up harming its competitors, often the solution is to subsidize them, too.We can see this particularly when it comes to energy. In order to promote renewable energy sources, the federal government offers what's known as a production tax credit, which allows wind and solar generators to deduct money from their taxes for every kilowatt-hour of electricity they produce. Companies that produce other forms of energy have objected to the cost these subsidies place on taxpayers as well as the folly of having government pick winners and losers.That's fair enough. Yet many companies are fine with an unfair subsidies system as long as it's unfair in their favor. Last year, generators of coal and nuclear plants pushed hard for a Department of Energy proposal that would guaranteed them a profit. While the plan was ultimately shelved, advocates ended up looking more than a little hypocritical.Texas isn't immune from this mentality. The state has its own version of a production tax credit, only it's for certain types of natural gas. The so-called high-cost gas deduction allows certain types of mostly unconventional wells to receive a reduced tax rate worth as much as half of the drilling and completion costs of the well. These are so-called high-cost deductions because eligible wells can get the deduction regardless of the price of natural gas on the market. For the last decade, natural gas prices have been at historic lows, and many wells end up flaring gas rather than bringing it to market.  Continue reading...

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