“Green” Energy Industry a Leading Recipient of Crony-Capitalist Coddling

Published December 9, 2011

A recently released report prepared by liberal think tank Citizens for Tax Justice (CFTJ) has attracted the attention of the mainstream media. Entitled “Corporate Taxpayers and Corporate Tax Dodgers 2008 – 2010”, the report points fingers at corporations that paid the lowest effective tax rates over those three years.

The leading “tax dodger” according to the report was Washington D.C.-based Pepco Holdings, a relatively small power company serving D.C. and Maryland. CFTJ says Pepco’s effective tax rate over the three-year period was -57.6 percent, which sounds bad, but the actual amount comes to about $500 million over three years, which is roughly the amount of money the Obama administration flushed down the toilet in the Solyndra scandal. At least Pepco is still in business.

$5 Billion to General Electric

Number two on the list is a not-so-little company called General Electric. Their case is more disturbing. GE’s effective tax rate of -45.3 percent over the three-year period amounts to almost $5 billion in taxpayer dollars flowing into the company’s coffers. Five billion dollars isn’t what it used to be, but – to paraphrase the late Sen. Everett Dirksen’s famous quote – a billion here and a billion there, and it eventually adds up.

Here’s the most interesting thing: CFTJ carefully explains where tax breaks and subsidies come from. Among the mechanisms noted are “Industry-specific tax breaks”.  Here’s their summary from page 13 of the report:

“Industry-specific tax breaks. The federal tax code also provides tax subsidies to companies that engage in certain activities. For example: research (very broadly defined); drilling for oil and gas; providing alternatives to oil and gas; making video games; ethanol production; moving operations offshore; not moving operations offshore; maintaining railroad tracks; building NASCAR race tracks; making movies; and a wide variety of activities that special interests have persuaded Congress need to be subsidized through the tax code.”

Did you catch it? They mention industries “providing alternatives to oil and gas.” Might that refer to the hundreds of billions of dollars in handouts the wind and solar power industries need to stay alive? Could we be talking about the average wind farm counting on tax breaks and subsidies for about 30 percent of its revenue, far more than any other form of energy?

Biggest Tax Dodgers

While I don’t agree with everything in CFTJ’s report (because it focuses on only one portion of complex economic issues), it is useful in calling out some of the companies that benefit from crony capitalism.

So why not call out the worst of the crony-capitalist deals by name? The so-called “green power industry” – predominantly in the form of wind and solar companies – is the worst of today’s tax dodgers.  Why not just say that? Unless there’s some ideological reason that prevents CFTJ from making that clear, of course.

Richard J. Trzupek ([email protected]) is a Heartland Institute policy advisor for environmental issues and principal consultant at Mostardi Platt Environmental in Oak Brook, Illinois.