Is this really a good energy policy?

In reviewing updates to the tax law, I noticed a couple changes with the “domestic production Activities Deduction”. For those of you who might not know anything about this deduction it is a tax provision that allows businesses that manufacture in the US to reduce their tax rate by 9%. So it’s a tax incentive to reward companies that produce products in the United States. A couple of interesting points about this tax incentive to not outsource jobs.


Point one; this bill was passed in 2004 by a republican congress and signed by a republican president. The people, who the democrats accuse of only pandering to wealthy, passed a very effective bill to promote American manufacturing.

Two; originally a business could reduce their tax rate by 3%. In 2007 the bill provided an increase to 6% and in 2009 an increase to 9%. But the democratic congress amended the bill for 2010, so people in the business of producing oil can only claim a reduction of 6%. So make something we really need like gum Balls and deduct 9%, whoopee cushions - 9% or ping pong paddles - 9%, but produce oil and only get 6%. Makes you wonder why the democrats want to make business more difficult for domestic oil producers at a time when imported oil is at an all-time high as well as gas prices. Also makes you wonder why Senator Schumer (DNY) lead the push to punish this one particular American producer and reduce this industries competitiveness against oil produced in countries with a much lower corporate tax rate.

In other news the Wall Street Journal reports that the oil and gas industry receives a total of 654 million dollars’ worth of tax incentives or about $ .64 for every megawatt of electricity produced.


Meanwhile the solar power industry receives 986 million dollars of tax incentives or $775.00 for every megawatt of electricity produced and the wind power industry receives 4,986 million dollars of tax payers’ money or $56.00 per megawatt of electricity.

I am not sure punishing the most productive energy producers and rewarding the most inefficient is really the best use of tax payer’s money.