Janet E. Milne (Vermont) presents Tax Expenditures and Alternative Energy: Sound Tax Policy? at the University of Toronto today at 12:10 pm – 1:45 pm as part of the James Hausman Tax Law and Policy Workshop Series.  Here is the abstract:

The United States is increasingly using tax expenditures to achieve energy policy objectives. The most recent federal energy legislation, enacted in August 2005, contained an estimated $14.6 billion in tax expenditures for energy-related activities over the next 10 years. Using tax expenditures for alternative energy as a case study, this paper analyzes whether the federal government is applying sound tax policy principles when it uses the federal tax code to try to achieve its goals of improving energy security and reducing pollution associated with traditional fossil fuels. The analysis covers tax expenditures for a wide range of sources of energy that are emerging as alternatives to traditional fossil fuels, including biodiesel, low-sulfur diesel, solar power, wind power, “clean” coal, and nuclear power. The paper focuses in particular on the extent to which tax expenditures are subsidizing activities already required by regulation. From a policy perspective, the relationship between tax and environmental regulatory regimes raises three significant and interrelated policy issues: Are these tax expenditures serving as behavioral incentives? Are these tax expenditures shifting the cost of regulatory compliance to the public at large? To the extent that tax expenditures are not acting as behavioral incentives and are subsidizing regulatory compliance, does sound tax policy nevertheless justify the result?