Sen Hagel, Rep Matheson and Bipartisan Ethics

By Stanford Matthews
originally posted at
Blog @ MoreWhat.com

Sen Chuck Hagel
In light of a press release from the American Council for Capital Formation and the connection made with Senator Chuck Hagel, some attention should be paid to it. Stating that the US Tax Code is unfavorable to specific investments and trying to draw support by characterizing energy interests as national energy security or environmental protection is nonsense.

It becomes even more nonsense when you consider that the two politicians Rep Jim Mathesonmentioned and quoted in the press release have vested interests that would conflict with an honest assessment on this topic. Senator Chuck Hagel’s involvement in business over nearly 30 years includes work as an investment banker in the eighties and the McCarthy Group in the nineties. The accouting firm, Ernst and Young, contributed to his campaign fund as well as Arthur Anderson and Enron. The quantity of energy interests listed on campaign finance disclosures for Senator Hagel are indicative of a biased slant in their favor. And Rep Jim Matheson is the owner of an energy consulting firm according to information at Project Vote Smart. Put this Republican Senator and Democratic Congressman together on this topic and you have definition of bipartisan politics and explanation why it is rarely a good thing.

Senator Hagel, Representative Matheson: U.S. Tax Code Unfavorable to Investments Needed for Energy Security and Environmental Protection
New Ernst & Young Study Shows U.S. Has Slow Cost Recovery and High Tax
Rates Compared to International Trading Partners

WASHINGTON, May 2 /PRNewswire-USNewswire/ — The U.S tax code fails to
provide a favorable investment climate for future infrastructure that will
be vital to national energy security and environmental protection,
according to a new study prepared by Ernst & Young on behalf of the
American Council for Capital Formation (ACCF). The ACCF study compares
depreciation allowances and effective tax rates for various energy
investments for the United States and eleven foreign countries. The U.S.
consistently ranked near the bottom internationally when it comes to cost
recovery on energy investments. U.S. companies also face much higher tax
rates on the profit from their investments than do companies in countries
like Canada, Mexico, China, India and Malaysia. Slow cost recovery and high
tax rates on investment raise the cost of capital, meaning fewer new
projects will be undertaken.
“The current federal tax code raises the cost of capital for U.S.
firms, putting them at a competitive disadvantage, and makes it harder to
provide solutions to our energy and environmental policy goals. This study
is another example of the enormous changes needed in the current federal
tax code to keep America competitive in the 21st Century marketplace,” said
Senator Chuck Hagel (R-NE), who headlined an ACCF forum today where the
study was released.
U.S. energy security and energy prices remain paramount national
issues. Strained energy supplies will be exacerbated by continued growth in
U.S. population, which means increased demand for home heating and cooling,
job growth and transportation. Complicating these challenges are increasing
environmental requirements for cleaner, more efficient technology to
produce energy while reducing growth in greenhouse gas emissions.
To meet these challenges, U.S. industry must make large investments
over the next decade; electric utilities, for example, must invest up to $1
trillion by 2020 for new generating capacity, transmission, distribution,
and environmental control technology and demand-side management.
Unfortunately, the U.S. federal tax code fails to provide a positive
investment climate, especially compared to the favorable tax provisions
available to our international trading partners.
Specifically, the ACCF study found:
— The United States generally has less favorable tax depreciation
rules for electric generation, electric transmission and distribution, and
petroleum refining than many other countries, including a number of the
U.S.’s major trading partners.
— The U.S. generally has slower cost recovery during the first five
and ten years after the investment than the comparison countries. For
example, investments in electric generation fueled by natural gas, nuclear
and coal recovers less than 38% of the original investment during the first
five years and 68% during the first ten years in the U.S., compared to 80%
and 97%, respectively in Canada.
— When the time value of money is taken into account, the U.S.
depreciation rates remain less favorable than most of the competitor
countries. Again, an investment in electric generation fueled by natural
gas, nuclear and coal has a net present value of depreciation over the
entire recovery period of less than 66% of the original investment in the
U.S. compared to 84% in Canada.
— Because the United States has the second highest statutory corporate
marginal tax rate among OECD countries combined with generally less
favorable tax depreciation rules, the differences in effective tax rates
are even greater. The corporate effective tax rate on investments in
electric generation fueled by natural gas, nuclear and coal is estimated at
27-31% in the U.S., compared to 14% in Canada.
— These findings are consistent across all of the energy assets
studied, including different types of electric generation, electricity
transmission and distribution, pollution control equipment, and petroleum
refining.
“Tax policy is an important piece of the puzzle as we consider a
comprehensive energy policy in this Congress. I appreciate the effort
behind this study and look forward to becoming more familiar with
implications of tax policy on energy investment,” said Representative Jim
Matheson (D-UT) who also headlined the ACCF forum today.
“If the U.S. is serious about meeting energy demands and making
technology environmentally-friendly, then it needs to take a serious look
at making our tax code more favorable toward investment and more on par
with our international trading partners,” said ACCF senior vice president
and chief economist Margo Thorning.
The full ACCF study and downloadable bar charts are available at
http://www.accf.org.
The American Council for Capital Formation (http://www.accf.org) is a
nonprofit, nonpartisan organization dedicated to the advocacy of tax and
environmental policies that encourage saving and investment. The ACCF was
founded in 1973 and is supported by the voluntary contributions of
corporations, associations, foundations, and individuals.

SOURCE American Council for Capital Formation

Related links:
# http://www.accf.org