Top Democratic tax writers differ on clean energy breaks 

The chairmen of the House and Senate tax-writing committees plan to prioritize incentives for low- and zero-carbon energy sources as Congress works on a second major economic package this year. But they differ on whether to throw out the existing patchwork of tax breaks or expand on it.

Senate Finance Chair Ron Wyden, R-Ore., is renewing his push to consolidate 44 energy-related tax incentives into just three that scale up or down based on reduced emissions or energy usage. House Ways and Means Chair Richard E. Neal, D-Mass., on the other hand, is backing a plan to renew and expand dozens of existing policies while creating some new tax breaks as well.

Wyden’s plan would establish one credit for production of electricity or investment in facilities producing lower emissions than the national average, increasing in value with a maximum credit applied to zero-carbon electricity sources. Another is a credit for cleaner transportation fuels, with an expanded credit for electric vehicle purchases, and the last would incentivize energy efficient homes and buildings.

Wyden told CQ Roll Call last week many of the existing incentives are “just kind of monuments to yesteryear, really outdated provisions.”

He said he’s lobbying both Democrats and Republicans and pitching his plan as a more cost-effective climate solution. “This is a chance to get more green energy for less green from everybody’s wallet,” Wyden said.

The Oregon Democrat said he wants to use the budget reconciliation process again to pass his plan, similar to what his party used to enact the massive $1.86 trillion coronavirus relief law President Joe Biden signed on Thursday. He thinks infrastructure could be part of another reconciliation package too, but he said he doesn’t want to “front run” other senators on that question.

Infrastructure falls under the jurisdiction over multiple Senate panels, but Finance has sole jurisdiction over the tax code.

Biden’s goals

“I would like to, as part of this transition to the clean energy manufacturing sector, [incentivize] high-skill, high-wage jobs, which is pretty much what the president campaigned conceptually on in the fall, and this is a real bill that would put it into motion,” Wyden said. “And [Biden] obviously wants clean energy in this package too.”

Wyden and other Senate Democrats have been pushing their tax credit consolidation plan for years, and he got 25 cosponsors for the version he introduced in 2019. Then-Minority Leader Charles E. Schumer of New York cosponsored it, but the top Democrat on Energy and Natural Resources, Joe Manchin III of West Virginia, did not.

That proposal would have required electricity sources to be at least 35 percent cleaner than average to a qualify for a credit that went up to a maximum of 2.4 cents per kilowatt hour of production or 30 percent of the cost of equipment installation for zero-carbon electricity.

The transportation credit would apply to fuel sources averaging at least 25 percent cleaner than other fuels and scale up to $1 per gallon for zero-emission fuels and eliminate the per-manufacturer cap on electric vehicle credits. And the energy efficiency credit would grow in value as more energy at home and at the office is conserved.

Neal’s approach is quite different, at least for now. He’s backing a House bill, similar to what was included in that chamber’s infrastructure package last summer, that would mostly extend current policies like the production and investment tax credits for wind and solar power and a more generous electric vehicles credit.

Neal and other House Democrats would also bolster incentives for electric-vehicle charging stations, energy storage and battery technologies, while letting investors in renewable projects raise money in the capital markets without incurring corporate tax just like oil and gas pipeline operators.

New tax credits would be established for things like labor costs associated with installing mechanical insulation and for colleges and universities that teach “environmental justice” programs meant to help alleviate economic and health disparities in low-income and minority communities.

Neal also doesn’t want to resort to another budget reconciliation process that cuts out Republicans from the negotiating table.

“I would prefer that there not have to be a next reconciliation bill, I would prefer that the regular order be adhered to,” Neal told CQ Roll Call. “I’m open to the renewables for sure, but again I think that on the energy front I think we can attract some Republicans. I mean, who would be against expanding tax credits for power storage, batteries, things like that? There are a series of things that you can do that are short of you having to use reconciliation.”

Neal said he thinks Biden is willing to negotiate with Republicans, in part because there is no firm deadline on climate issues. The president did not barter extensively with Republicans on the COVID-19 relief package due to lapsing unemployment benefits that were set to expire, Neal said.

“I think the problem that Republicans have with this reconciliation process is that they thought by putting $600 billion on the table that that would cause Biden to begin a painful long negotiation,” Neal said of the pandemic relief bill, referencing Republicans’ counter-offer on pandemic aid. “And I think that he would be happy to negotiate but the timetable dictated otherwise.”

Bipartisan package?

Rep. Peter A. DeFazio, D-Ore., chairman of the House Transportation and Infrastructure Committee, has said he doesn’t want to do public works legislation through the reconciliation process, mainly because of all the policy items that would be disallowed under Senate rules.

Speaker Nancy Pelosi, D-Calif., said on Friday that she wants to do a “big, bold and transformational infrastructure package” that also involves energy, broadband, housing and other provisions. She made a pitch for bipartisanship, but didn’t specifically rule out another attempt to use reconciliation under the fiscal 2022 budget process.

Pelosi added that lawmakers need to be mindful of the next package’s “impact on the federal budget,” a nod to keeping costs down or offsetting them with tax increases. Speaking about infrastructure at her weekly press conference Thursday, Pelosi said, “We’ll have to pay for some of it.”

DeFazio has said considering climate change in the upcoming infrastructure bill is a must. His committee will hold a hearing on climate and surface transportation on Wednesday.

Across the Capitol, Sen. Thomas R. Carper, D-Del., chairman of the Senate Environment and Public Works Committee, is also trying to put together a bipartisan package. He told reporters Wednesday he plans to have a surface transportation bill out of committee by Memorial Day, May 31.