WSJ op-ed: ‘Want Growth? Try Stable Tax Policy’

Stable tax policy is fundamental to business investment and growth, writes Hoover Institution senior fellow John B. Taylor in a recent Wall Street Journal opinion article. Mr. Taylor offers some additional thoughts we don’t necessarily endorse, but on this point, we’re in strong agreement (see, for example, "Fact check: Heritage errs in supporting job-killing tax hike," Dec. 19).

In our case, of course, the wind power industry is seeking a multi-year extension of its key incentive, the Production Tax Credit (PTC), which lowers taxes on companies that operate wind farm plants based on the amount of electricity they produce. While Mr. Taylor is speaking more generally, he does an excellent job of explaining the importance of stable tax policy:

"Some claim that … policy unpredictability is not a problem, arguing that an obvious lack of demand rather than policy uncertainty is holding the economy back. But demand is low in part because firms are reluctant to hire workers or invest long term not knowing what tax rates and other provisions will be. Demand for investment will increase if policy unpredictability is reduced."

In recent years, he adds, Congress has increased the number of tax provisions subject to short-term expiration and extension, in the process adding to policy uncertainty that is a drag on the economy.

While Mr. Taylor is speaking on the macro level, the wind power industry offers an excellent case study of an expiring tax incentive and its impact in the real world. According to a recent study by Navigant Consulting, allowing the PTC to expire and raising taxes on wind energy will cut American wind turbines manufacturing jobs by one-third, while private investment in the industry will drop by nearly two-thirds. The study also found that with stable tax policy, the wind power industry can grow to nearly 100,000 American jobs in the next four years – including an increase in the wind turbines manufacturing sector by a third, to 46,000 American manufacturing jobs. This will keep the wind power sector on track to support 500,000 jobs by 2030, as projected by the U.S. Department of Energy during the George W. Bush administration.

Job losses are already beginning and will accelerate with each month Congress allows the PTC to move nearer to expiration. The incentive has already effectively expired for the wind manufacturing sector, as PTC uncertainty is making businesses hesitant to plan future U.S. wind farm projects. American wind manufacturers have essentially zero orders for 2013, and layoffs in companies that develop wind farm projects have already started. Therefore, Congress must act now.

Bipartisan legislation (H.R. 3307, the “American Renewable Energy Production Tax Credit Extension Act”) recently introduced by Representatives Dave Reichert (R-Wash.) and Earl Blumenauer (D-Ore.) seeks to extend the wind energy PTC for four years. This legislation has garnered the support of 45 cosponsors, including 11 Republicans. A vote for a PTC extension is a vote for growing clean, homegrown, affordable energy resources and badly needed new American manufacturing jobs. Thanks to Congressmen Reichert and Blumenauer for realizing this and for their national leadership on this vital issue.

Tom Gray,