Recently I commented in Roll Call on budget politics, energy and the value of moving ahead with fundamental growth driving tax reform. Chairman of the House Ways and Means Committee, Dave Camp (R-MI) had recently introduced a tax reform package that can make a real difference in growth, including the already dynamic but threatened energy industry in the U.S.
Many have called Chairman Camp’s package from the House a tremendous long shot in light of extreme congressional partisanship, the control of the two houses by different parties, and Chairman Camp’s impending retirement from the House. But perhaps tax reform is not such a long shot after all. And the reason is Senator Ron Wyden (D-OR), who now chairs the Senate’s Finance Committee. He has made tax reform a priority as well.
Mr. Wyden has stated in his blog, “The U.S. tax code is clearly in need of reform.” Calling the current tax code a “rotting carcass that smells worse every year,” he has supported a flat corporate tax rate. He has also supported simplification of the tax code, and he has linked tax reform to job growth. Continuing his comments about the need for reform in his blog, he added, “We need comprehensive tax reform that simplifies the corporate and the individual code at the same time so that no U.S. business or taxpayer is left out.”
Chairman Wyden has frequently commented on the energy-related aspects of the US tax code. More often than not, he has supported tax incentives for renewables from the perspective of parity between traditional sources of energy and renewable sources. Among the energy tax issues he has addressed are master limited partnerships (MLP), which have encouraged development and job growth for traditional energy companies. And traditional energy companies have delivered for the benefit of the US economy, having created 148,000 jobs in 2011, 37,000 of which were direct jobs within the industry.
In discussing his approach to energy-related tax reform, Chairman Wyden said tax reform could present two options for the industry when it comes to MLPs. Congress could pare them back for existing recipients as Chairman Camp proposed in his recently drafted tax reform package, thereby raising revenue with a commensurate reduction in the top-line corporate tax rate. Alternatively tax reform could extend to all sectors, as would happen under the “MLP Parity Act” sponsored by, among others, Senators Chris Coons (D-DE) and Jerry Moran (R-KS), along with House Representatives Ted Poe (R-TX) and Mike Thompson (D-CA).
The choices open for tax reform are many. But consideration has to be given to how the US assures its continued progress toward energy independence, which formerly was considered a dream. As Penley on Education and Energyreported almost two years ago, there is increasing available evidence that US energy independence has finally become a realistic possibility. And whether energy independence is a reality or not, the value of the US energy industry is enormous for US economic growth and improvements in US balance of payments.
Like Chairman Camp and Chairman Wyden recognizes that delivering on tax reform while driving growth will not be easy. But the combination of a reforming Democrat from the Senate and reforming Republicans in the House of Representatives may make tax reform a real possibility. Both retiring Representative Camp and Senator Wyden recognize the benefits of growth and the limitations on growth represented by our current tax code.
For the sake of the energy industry and widespread opportunity for growth from all sectors of our economy, tax reform may not be so out of reach after all.