Report: Actually, the tax code doesn't favor oil over renewables

Doesn’t matter who the cronies are, crony capitalism always makes a mockery of the free market. That’s why I’m OK with it when President Obama pledges to end “tax breaks for oil companies.” As Paul Ryan says, by all means, let’s close loopholes to lower rates.

But the gig is up on the Obama administration’s claim that the tax code disproportionately favors oil companies over renewable energy companies. It doesn’t. A chart from the CBO with commentary from The Heritage Foundation’s Lachlan Markay:

As the chart shows, renewable energy is far more heavily subsidized by tax carveouts than any other energy sector, including fossil fuels.

The chart does not, however, take into account the level of those subsidies in proportion to the amount of energy that each sector creates. By that measure, renewables’ federal subsidies are even more lopsided.

As Heritage’s David Kreutzer has pointed out, wind energy companies, for instance, get about 1000 times the subsidies that oil companies do, per kilowatt-hour of energy produced.

If the president wishes to correct the impression of hypocrisy, he has several options:

  1. He could level the playing field by increasing subsidies to oil companies (a poor choice in principle and practically if for no other reason than that it would add to the deficit).
  2. He could eliminate all energy subsidies (my preferred option).
  3. He can openly acknowledge his desire to take over the energy industry so as to force the nation off petroleum and onto renewables and knock off the rhetoric that he wants to end tax breaks for oil companies for any reason other than that.

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