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15 March 2012

Dear Representative:

On behalf of Americans for Tax Reform (ATR), and millions of taxpayers nationwide, I urge you to cosign Rep. Flake’s Dear Colleague which asks Congress to let current law run its course by allowing the Production Tax Credit (PTC) for renewable energy sources to expire on December 31, 2012.

Allowing the PTC to lapse is not a tax increase as it was never intended to be permanent. The 112th Congress is under no obligation to extend temporary tax policy; simply because the PTC is law in 2012 does not justify the tax credit’s existence indefinitely. The PTC was originally introduced to facilitate a fledgling industry. Since then, the wind industry has sufficiently matured and its power generation is even mandated in numerous states.

ATR supports immediate elimination of the PTC so long as the tax increase is offset by an equal or greater tax cut. Embracing this pro-growth tax reform strategy, Rep. Pompeo has introduced the Energy Freedom and Economic Prosperity Act which eliminates every energy tax credit and reduces the corporate tax rate by an equal amount. The PTC disadvantages energy consumers by skewing America’s energy market, propping up an inefficient industry, and distorting our tax code.

Originally introduced under the Energy Policy Act of 1992, the PTC was expanded to include wind production under the 2005 American Jobs Creation Act. By claiming the PTC in excess of $1 billion annually, the wind industry has come to depend on the 2.2 cent per kilowatt-hour tax credit.

Relying so heavily on the PTC, the wind industry has put Congress in the awkward and ill-suited position of deciding whether Americans will consume more or less wind energy. America’s energy markets are enormously complex systems which function most efficiently without government’s distortive policies.

Proponents of the PTC extension tout potential job creation and warn of possible job losses should Congress fail to reauthorize the PTC. However, many of the studies cited by PTC advocates ignore job losses in other industries that produce and transport coal and natural gas. Similarly, since wind is less efficient than traditional forms of energy, further reliance on wind will likely increase employers’ electricity bills and also induce layoffs.

Given wind energy’s cost and inability to consistently generate power, it is unsurprising that this energy source supplies less than 3 percent of America’s electricity needs.

Burdened with political considerations, the federal government is ill-equipped to determine what source of energy Americans should use. With the PTC set to expire at the end of this year, Congress has a great opportunity to clean America’s tax code and begin peeling back government’s distortive policies—simply by taking no action.

Grover G. Norquist