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Energy-Related Tax Preferences and Job Creation: Which Industries Provide the Best Value for Taxpayers?

issue brief

Energy-Related Tax Preferences and Job Creation: Which Industries Provide the Best Value for Taxpayers?

June 21, 2012
Energy & EnvironmentOther

Advocates of wind energy are actively lobbying Congress for a multiyear extension of the 2.2 cent-per-kilowatt-hour production tax credit.

The Obama administration has made an extension of the tax credit part of the president’s reelection strategy. During the American Wind Energy Association’s recent WindPower 2012 convention in Atlanta, Heather Zichal, deputy assistant to the president on energy and climate issues, declared that if Congress doesn’t extend the tax credit, “factories will close and tens of thousands of people will lose their jobs.”

The oil and gas sector has made similar claims about the need to preserve its tax preferences in order to avoid job losses.[1]

That brings up an obvious question: Which forms of energy get the biggest subsidies? And perhaps just as important: How effective are those subsidies, or tax preferences, at creating jobs?

Some simple calculations, based on recent data from the Congressional Budget Office, show that the tax preferences given to the wind sector result in far fewer jobs when compared with the tax preferences given to the fossil-fuel sector. In addition, if conventional sources of electricity generation were to receive the same level of taxpayer support as is now extended to the wind-energy sector, the cost to taxpayers would amount to tens of billions of dollars per year.

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