End Energy Subsidies to Reduce National Debt

It is going to take massive reductions across all areas of government spending if America hopes to avoid a future sovereign debt crisis. Ending energy subsidies for both conventional and alternative energy would shave hundreds of billions of dollars off the federal government’s perpetually red balance sheet.

Subsidies for conventional energy sources such as oil and coal most often are in the form of special tax treatment. According to the Energy Report released in May 2008 by the Texas Comptroller of Public Accounts, the U.S. Office of Management and Budget estimated that in 2006 the oil and gas industry received federal tax subsidies that amounted to $3.5 billion. The largest oil and gas tax subsidies are the Expensing of Exploration and Development Costs Credit, the Percentage Depletion Allowance, and the Alternative Fuel Production Credit — all favorable tax treatments intended to spur more oil and gas production.

Alternative energy sources such as wind, solar and ethanol receive billions of dollars in subsides through direct grants and special tax treatments. The federal government’s Office of Energy Efficiency and Renewable Energy budget was $16.8 billion in 2010. In addition to federal subsidies, many states like Michigan have mandated that a certain percentage of electricity production come from alternative energy sources.

The government needs to get out of the business of using taxpayer money to favor one energy source over another. Politicians on both sides of the aisle share the blame for these complicated and expensive forms of corporate welfare. Let’s stop the madness and let energy sources compete in the market place without government manipulation — saving the taxpayer billions of dollars in the process.

Permission to reprint this blog post in whole or in part is hereby granted, provided that the author (or authors) and the Mackinac Center for Public Policy are properly cited.