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Give us a break

Which are better, tax loopholes for the mega-rich or tax credits for renewable energy?

May 23, 2008

You don't have to be an environmentalist, or even a believer in global warming, to support tax credits for renewable energy -- solar and wind power are clean, sustainable alternatives at a time when prices for fossil fuels are soaring. Yet congressional Republicans and the Bush administration are willing to let existing credits expire because they don't want to close a tax loophole for multimillionaire hedge-fund managers. If any further evidence were needed that the party needs to rethink its Jurassic energy strategies, this would be it.

The House on Wednesday passed a $54-billion package of tax breaks, of which incentives for clean energy account for a little under $20 billion. Because generating solar, wind or geothermal power involves steep upfront expenses, the tax credits are vital. Without them, this country stands no chance of reducing its reliance on carbon-spewing, coal-fired power plants. Yet even though the incentives enjoy wide bipartisan support, efforts to extend them have repeatedly failed because members of Congress can't agree on how to pay for them.

The House bill passed 263 to 160, but that's not enough to overcome a threatened veto from President Bush. The bill's fate in the Senate, meanwhile, is highly uncertain given opposition from Republican leaders.

Many Republicans object to the credits because they would be offset by postponing an obscure tax break for corporations with foreign operations that was supposed to take effect next year, and by cracking down on hedge-fund managers, who would no longer be able to avoid billions of dollars in taxes by diverting money to offshore havens. Thus, while middle-class Americans are struggling with skyrocketing energy costs, these lawmakers are standing in the way of alternative energy sources in order to defend an unfair tax loophole for the mega-rich. It will be interesting to see how those facing reelection try to justify that in November.

John McCain, the presumptive GOP presidential nominee, is a believer in renewable power who offers serious solutions to global warming. With rising awareness of that problem as well as public dismay over eight years of failed energy policies, other members of his party would do well to take the issue as seriously as he does. The trouble with the House bill isn't that it proposes unreasonable new taxes, it's that it doesn't go far enough -- it extends the tax credit for wind power for just one year, far too short-term a guarantee to make investors comfortable. Still, it's a good next step until President McCain or Obama or Clinton brings a savvier approach to the White House.

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