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HOW THE TAX LAW GETS COMPLICATED, EXAMPLE #93,412

June 15, 2005

Headline from Tax Analysts free site:

Grassley Packs $16 Billion in Incentives Into Energy Tax Title

The Senate Finance Committee fell just short of its spending target with the June 14 release of a $16 billion energy bill tax title that includes tax breaks for almost every segment of the energy industry.

According to the Joint Committee on Taxation, the chairman’s mark would cost $16 billion over 10 years, but over the first 5 years would cost just less than the $11 billion allowance in the 2006 budget resolution. Finance Committee Chair Chuck Grassley, R-Iowa, and ranking minority member Max Baucus, D-Mont., held costs down by sunsetting many of the tax breaks and only temporarily extending several others. But the legislation has little in common with the $8 billion House version, making it likely the cost could again balloon in conference negotiations.

In real life, rising energy prices are all the incentive needed for increased energy production and conservation. That, and maybe the government getting out of the way of exploration and refinery construction. But Congress is here to help.

The firewalled version of the article spells out some of the new tax breaks:

For energy conservation and efficiency, the Senate left the House behind with tax credits for efficient commercial buildings ($766 million, sunsetting in 2009), business credits for construction of energy-efficient homes ($706 million, sunsetting in 2007), a building credit for efficient heating and cooling systems ($1 billion, sunsetting in 2008), and new credits for more efficient home dishwashers, clothes washers, and refrigerators ($300 million staggered sunsets).

You know things are out of hand when even the sunsets are staggered by the tax breaks.

The Senate bill also takes care of the powerful oil and coal lobbies, providing $2 billion in incentives for generating electricity with clean coal, $727 million to allow expensing of equipment for refining liquid fuels, and $1.1 billion for enhanced oil recovery.

Despite the high combined price tags of the House and Senate tax titles, and the president's admonishments on cost, Grassley said he remained confident tax incentives would not hold up the bill.

No, they'll help it slide right on through.

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