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Energy Policy and Tax Reform

Donald Marron

Published: September 22, 2011
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The text below is an excerpt from the complete document. Read the full written testimony in PDF format.

Abstract

Donald Marron's testimony before the House Subcommittee on Select Revenue Measures and the Subcommittee on Oversight of the Committee on Ways and Means on energy policy and tax reform.


Chairman Tiberi, Chairman Boustany, Ranking Member Neal, Ranking Member Lewis, and Members of the Subcommittees, thank you for inviting me to appear today to discuss energy policy and tax reform.

Lawmakers have used the tax code to influence energy markets for almost a century. Early efforts focused on promoting the development of domestic oil and gas resources. Following the energy crises of the 1970s, new tax incentives were created for alternative energy sources and energy efficiency. Lawmakers also introduced new taxes, for example the gas guzzler tax, to discourage energy use. In the 1980s, many tax incentives were reduced or eliminated, in part as a result of the Tax Reform Act of 1986, which sought to reduce the complexity and inefficiency of the tax code. Since then, new tax incentives have been introduced, with recent efforts promoting greater use of renewables and energy efficiency.

Because of ongoing concerns about climate change, energy security, and other risks associated with energy use, many observers believe that lawmakers should continue to use the tax system as a tool of energy policy. Some recommend tax breaks for domestic energy production. Some recommend incentives for cleaner ways of producing and using energy. And some recommend increasing existing taxes (e.g., on gasoline) or introducing new ones (e.g., on carbon emissions) to discourage energy use and its negative consequences.

Those suggestions come at a time of increased concern about the complexity and inefficiency of our tax system. Many observers have become skeptical of the way social and economic policies are implemented in the tax code. There is also rising concern about America's daunting fiscal outlook. For both reasons, there have been calls from across the political spectrum to cut back on tax preferences and use the resulting revenue to lower tax rates, reduce future deficits, or adopt some combination of the two.

End of excerpt. The entire report is available in PDF format.