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Wednesday, June 25, 2008
Offsets Extend Tax Credits the Smart Way
By U.S. Sen. Jeff Bingaman
New Mexico Democrat
New Mexico is poised to become a center for companies to manufacture “green” technology, and a major exporter of energy produced by wind, solar and other renewable sources. Essential to making this happen are federal tax incentives for renewable energy, which are set to expire this year.
The Senate tried once again — but failed — to extend these incentives. The debate pitted Democrats who insist on paying for the incentives against Republicans who would support the measure only if we borrow money to pay for them. This discussion needs to be understood in the context of our current federal deficit.
There's no denying that our country is on an unsustainable financial course. This year, our gross federal debt will grow by more than $800 billion, reaching $10 trillion.
Each year, the interest on this debt costs Washington more than 20 percent of the individual income tax revenue we collect — more than the combined federal spending on international affairs, science, space and technology, agriculture, transportation and education. At the very least, we must tighten our belts and do all that we can to avoid running up the nation's credit card bill even further.
Besides draining our federal treasury, this enormous debt magnifies our broader economic problems. It's like a game of dominoes. Our debt has substantially weakened the dollar, which in turn has contributed to soaring oil prices, which forces New Mexico families to stretch already tight budgets, slowing down our state's economy. Last month, the nation's unemployment rate jumped by a half a percent, the largest one-month increase in two decades.
Against the backdrop of this deficit and debt, when Democrats took over leadership last year of the House and Senate, we adopted “pay-as-you-go” rules for federal taxation and spending. The idea is simple: When Congress enacts laws with a price tag — whether an increase in spending or a reduction in expected revenue — we must find a way to pay for those laws without turning again to our creditors to borrow more money that our children and their children will have to repay.
It was with this fiscally responsible practice in mind that we wrote a bipartisan bill last year that would have extended tax incentives to advance solar, wind and other promising renewable energy technologies. That $18 billion measure was to be paid for by reducing subsidies for the five biggest oil companies, which are making record profits.
But the proposal was defeated when the Senate fell one vote shy of the 60 needed to end a filibuster. Nevertheless I was heartened when some Republicans said that even though they opposed reducing subsidies for large oil companies, they would work to find acceptable offsets in the budget to pay for these critical incentives for renewable energy. So we went back to the drawing board.
The Senate voted June 17 on a bill that paid for the incentives package by closing a tax loophole exploited by hedge-fund managers and by postponing a tax cut for U.S. companies doing business overseas. Many in the business community agreed that these offsets were an appropriate as a way to extend the incentives for renewable energy without increasing the deficit. But the Republican minority disagreed, and filibustered. In blocking this critical legislation, Republicans have said they strongly back extending the tax incentives but refuse to support any provision that offsets the reduction in revenue. Forty-one senators have signed a letter to the chairman of the Senate Finance Committee making that very point.
New Mexico has a lot at stake in this renewable energy debate. There is no question that extending the renewable tax incentives — many of which were first enacted in 2005 through legislation Sen. Pete Domenici and I helped write — will improve New Mexico's chances to create good-paying “green collar” jobs.
But given our nation's very serious fiscal problems, I feel strongly that we should act in a responsible manner when we extend these important renewable energy tax incentives. My first choice is to enact multi-year tax incentive extensions that give renewable energy technologies time to mature, and to do so by finding revenue to pay for them.
In fact, given the fragile politics of Capitol Hill, paying for these tax incentives is perhaps the only way to ensure approval. A coalition of fiscally conservative House Democrats who call themselves the Blue Dogs is insisting on offsets, and the majority whip has warned the Senate not to bother sending over a bill without them.
For years, I have been a vocal advocate for renewable energy technologies because I believe they are key to weaning our country off foreign oil and shifting toward cleaner, homegrown energy sources. If we determine that the only way to get Republican support for extending renewable tax incentives is to enact them without an offset, then I will reluctantly cast my vote for such a bill. But I hope, for the sake of our nation's fiscal health, it will not come to that.
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