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Imposing a Minimum Effective Tax Rate for High-Income Taxpayers-- Motion to Proceed

Floor Speech

Location: Washington, DC


Mr. GRASSLEY. Mr. President, a couple weeks ago, and just now my colleague, the Senator from Tennessee, has been speaking on the Senate floor in opposition to the wind energy production tax credit.

Obviously, I have great respect for Senator Alexander. A person who has been in the Cabinet, a person who has been Governor of their State, a person who has been president of a university, and probably a lot of other important positions, can't help but be respected as a very important Senator and a very knowledgeable Senator. While I differ with him greatly on this issue, I will continue to respect him.

The greatness of this body allows for debate and disagreeing points of view to be heard. I disagree strongly with my colleague. It might be natural for me to do that because I have championed the wind energy tax credit as a way to provide a level playing field for a very clean renewable resource.

As a result, wind energy has become more efficient and cost effective. The cost of wind energy has declined by 90 percent since the 1980s. Wind has accounted for 35 percent of all new American electric generation in the last 5 years. Wind already provides 20 percent of the electric generation in my State of Iowa. It supports as many as 5,000 good-paying jobs in our State.

As a result of the tax incentive, the wind energy has actually created new manufacturing jobs in the United States. Today, 60 percent of the wind turbines' value is now produced in the United States, compared with 25 percent 6 years ago. There are now 400 facilities building wind components in 43 States. That is why a bill in the House of Representatives to extend the wind energy production tax credit has 80 cosponsors, including 18 Republicans.

If we fail to extend the incentive, thousands of jobs will be lost in the wind manufacturing industry. Unemployment remains high at 8.3 percent. Why would Congress exacerbate the unemployment in our country by failing to extend this successful incentive?

The Senator from Tennessee has criticized wind turbines because he believes they are ugly and they kill birds. Well, I happen to find them majestic and awe-inspiring on the landscape.

With regard to bill-kill accusations, the Senator's claims were evaluated by Politifact, a fact-checking organization. They concluded that the estimates of birds killed by wind turbines vary widely and that there is no consensus. They do point out that the 400,000-bird estimate used by Senator Alexander is the conclusion of just one person. It is not an official U.S. Fish and Wildlife estimate. In fact, the U.S. Fish and Wildlife cites figures that are, at most, half that, if not less by much.

By comparison, 976 million birds die annually from collisions with buildings. Collisions with high-tension lines kill between 130 million and 1 billion birds. Cars kill 80 million birds each year.

The Senator from Tennessee referred many times to the wind project built in his State by the Tennessee Valley Authority. They constructed a 29-megawatt wind farm at Buffalo Mountain at a cost of $60 million. But it only generates 6 megawatts, because it generates electricity only 19 percent of the time. The Senator criticized it as being inefficient, wasteful, and ill-advised. The TVA apparently characterizes it as a failed experiment. He blames the Federal incentive for this failed wind project. The blame is totally misplaced. I think the blame should go to the taxpayer-subsidized TVA which put windmills where there was very little wind.

We do agree that the modification made to the renewable energy incentives in the stimulus bill of 2009, specifically the creation of the 1603 cash grant program, is in fact bad policy and should not be extended. However, the production tax credit, which I first authored in 1992, provides the incentive only for electricity that is actually produced. Under the production tax credit, there is no tax benefit simply for placing the turbine in the ground. Electricity must be produced in order to get the credit.

The Senator from Tennessee went on to say that the tax incentive has encouraged developers to build wind projects in places with insufficient wind resources. The TVA project is the only one I am aware of that was built with no prospects of generating electricity. For-profit utilities have to look out for the bottom line. They are not going to make an investment if it doesn't make economic sense. A nonprofit such as TVA can fritter away money, which is what they apparently did in this wind energy project.

The Senator from Tennessee might spend a bit of time criticizing the leaders of the TVA over their poor decision to build this wind project in the first place. I am not aware of a policy forcing them to develop wind. There is no mandate that they build a wind farm there in the State of Tennessee.

Most intelligent businesses determine whether an investment makes common sense. The Tennessee Valley Authority obviously failed in that regard in relationship to this wind project. The Senator from Tennessee might use his time getting to the bottom of this leadership failure and squandered resources by the Tennessee Valley Authority.

I am also glad that he raised the issue of the Tennessee Valley Authority. Much of the criticism aimed at the wind production tax credit is that it is costly, was meant to be temporary, and that it provides a small benefit at great cost. Those same accusations could clearly be aimed at the Tennessee Valley Authority. Regardless of one's opinion of the TVA, there is no doubt--it is a big government program subsidized by all Americans that benefits just a few.

The TVA was created in 1933 to provide flood control, navigation services, and electrical power in the Tennessee Valley region. For more than 60 years, Congress appropriated funds to cover losses by the Tennessee Valley Authority.

A 2009 article published by Jim Powell of the Cato Institute noted that a study estimated the annual cost of capital subsidies exceeded $1.2 billion, including taxes that the Tennessee Valley Authority was able to avoid.

In 1997, the Heritage Foundation issued a report entitled ``Five Good Reasons to Force the TVA into Mandatory Retirement.'' This report stated:

Throughout its history, the TVA has benefited from generous subsidies, tax breaks, and regulatory exemptions that allow it to keep its power rates lower than the national averages. Yet, despite its protected geographic monopoly, substantial indirect subsidies totalling roughly $1.2 billion each year, sweeping, across-the-board regulatory exemptions, the TVA has managed to amass a debt of well over $27 billion and a disturbing record of waste, mismanagement, and chronic cost overruns.

The private nonprofit group Citizens Against Government Waste has suggested selling the TVA's electric power assets and privatizing its nonpower functions. In their 2011 list of ``Prime Cuts,'' they argued this move would save taxpayers $16.2 billion over 5 years.

Even the Congressional Budget Office listed the TVA in its March 2011 report on spending and revenue options to reduce the national debt and the annual deficit. When the Federal Government is borrowing 40 cents of every dollar we spend, perhaps the time has come to review an entity that benefits 3 percent of the population at a cost of over $1.2 billion annually. And I use that 40 cents the Federal Government is borrowing of every dollar we spend just as the Senator from Tennessee a few minutes ago used that very same figure as a rationale for eliminating certain expenditures. In this particular case, I apply it to the Congressional Budget Office recommendation of selling TVA.

Rather than blaming the tax incentives for an ill-conceived wind project, I think a review of the management and taxpayer subsidy of TVA would be more appropriate.

On many occasions, the Senator from Tennessee has argued that the incentives should be repealed and the savings used to double the Federal energy research budget and to support development of new nuclear.

First, I support research efforts to develop clean energy, but I do not support imposing a tax hike on one energy industry so we can spend billions through our Federal bureaucracy. This idea is nothing more than a tax increase to pay for further Washington spending. It is this kind of activity that helped create the fiscal mess our country is in right now.

Second, I strongly support nuclear energy. In fact, I believe there are four critical elements to a comprehensive energy policy. They are drilling for domestic oil and gas, promoting renewable and alternative energy, supporting conservation and, of course, fourth, nuclear energy.

Nuclear is an emission-free resource. It certainly should play a key role in providing our Nation and economy with renewable emission-free energy. However, this discussion of wind energy versus nuclear energy should be an intellectually honest debate. The fact is, nuclear energy in the United States would not exist today--would not even be here today--without significant government support over 60 years, and development of new nuclear in the United States is unlikely to happen without even greater government intervention and subsidies.

An analysis done by the Christian Science Monitor concluded that the nuclear power industry in the United States receives about $9 billion annually in subsidies. They state that the subsidies stem from things such as Federal decommissioning, waste management policy, and research and development in the Nation's National Laboratories.

The Union of Concerned Scientists published a document in February of last year entitled ``Nuclear Power: Still Not Viable without Subsidies.'' They contend that the 50-year-old nuclear industry has benefited from 30 subsidies. The Price-Anderson insurance liability policy was enacted in 1957 as a temporary measure for an infant industry. It was recently extended until the year 2025.

The Cato Institute published an article, June 2003, entitled ``No Corporate Welfare for Nuclear Power.''

That report states:

Despite extensive and continued government assistance--including more than $66 billion in research and development alone--no nuclear powerplant has been ordered and built in the United States since 1973.

But it goes further.

The decline of nuclear power is the result of several factors: the Three Mile Island disaster heightened public safety fears and citizen opposition to the siting of grants in their neighborhood grew. But nuclear power was ultimately rejected by investors because it simply does not make economic sense. In truth, nuclear power has never made economic sense and exists purely as a creature of government.

A more recent piece by the Cato Institute cites an economist who believes existing nuclear power subsidies are equal to one-third or more of the value of the power produced, and that they face a negative 49-percent tax rate.

There are only two new nuclear plants on the drawing board in the United States today. Both are recipients of loan guaranties provided by the Department of Energy. One is an $8.3 billion loan guaranty, and the other is $2 billion. When the Loan Guaranty Program was first created by Congress, the Congressional Budget Office estimated that ``the risk of default on such loan guaranties to be very high--well above 50 percent.'' This is the same program that backed Solyndra.

Congress originally set aside $18.5 billion for loan guaranties for nuclear. President Obama has requested tripling that amount to $54.5 billion. It is estimated that this $54 billion would help construct 12 new nuclear plants. That is about $4.5 billion each.

Congress created a production tax credit for new nuclear in the year 2005. Now the nuclear industry is advocating a 30-percent investment tax credit for these new nuclear constructions.

They are also advocating that the production tax credit be extended to the year 2025--that is right; they are seeking to extend for another 13 years a temporary tax incentive.

Taxpayers for Common Sense, in an article published just last week, concluded:

The U.S. cannot afford to shoulder the high price tag and long term fiscal risk. If the industry cannot figure out a way to manage its long term risks, the taxpayer should not step in. This is especially true when the nation is staring into a $15 trillion chasm of debt. After more than 50 years of subsidies and support, it's well past time for the nuclear industry to stand on its own two feet.

I do not raise these points to undermine our nuclear industry. I am not urging my colleagues to end the entire big nuclear gravy train at this time. I support that form of energy as one component of a comprehensive energy program. I support a real, ``all-of-the-above'' approach to energy security. But a fair comparison of Federal support for wind and nuclear needs to be made. That is the point of my remarks at this time.

I say to the Senator from Tennessee, as he just spoke and as he spoke a couple of weeks ago, it is intellectually dishonest to criticize wind incentives while at the same time ignoring those subsidies for nuclear energy. The Senator from Tennessee referred to a Wall Street Journal editorial that criticized the wind energy incentive. It called into question whether wind energy could survive a market-based system.

I will eagerly await an editorial in the Wall Street Journal--which, by the way, will never appear--calling for the gravy train for big nuclear to end after nearly 60 years of Federal subsidies with no market-based timetable on the horizon.

I yield the floor. I suggest the absence of a quorum.


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