By John Stewart, MUIRNet-News

Historically, U.S. federal energy tax policy promoted the supply of oil and gas.

However, the 1970s witnessed (1) a significant cutback in the oil and gas industry’s tax preferences, (2) the imposition of new excise taxes on oil, and (3) the introduction of numerous tax preferences for energy conservation, the development of alternative fuels, and the commercialization of the technologies for producing these fuels (renewables such as solar, wind, and biomass, and nonconventional fossil fuels such
as shale oil and coalbed methane).

The Reagan Administration, using a free-market approach,
advocated repeal of the windfall profit tax on oil and the
repeal or phase-out of most energy tax preferences — for oil
and gas, as well as alternative fuels. Due to the combined
effects of the Economic Recovery Tax Act and the energy tax
subsidies that had not been repealed, which together created
negative effective tax rates in some cases, the actual energy
tax policy differed from the stated policy.

The George H. W. Bush and Bill Clinton years witnessed a return
to a much more activist energy tax policy, with an emphasis on
energy conservation and alternative fuels. While the original
aim was to reduce demand for imported oil, energy tax policy
was also increasingly viewed as a tool for achieving
environmental and fiscal objectives.

The Clinton Administration’s energy tax policy emphasized the
environmental benefits of reducing greenhouse gases and global
climate change, but it will also be remembered for its failed
proposal to enact a broadly based energy tax on Btus (British
thermal units) and its 1993 across-the-board increase in motor
fuels taxes of 4.3¢/gallon. The Working Families Tax Relief Act
of 2004 (P.L. 108-311) and the American Jobs Creation Act of
2004 (P.L. 108-357) each contained several energy-related tax
breaks.

The George W. Bush Administration has proposed a
limited number of energy tax measures, but the 109th Congress
enacted the Energy Policy Act of 2005 (P.L. 109-58) —
comprehensive energy legislation that included numerous energy
tax incentives to increase the supply of, and reduce the demand
for, fossil fuels and electricity.

Signed by President Bush on August 8, 2005, it provided a net
energy tax cut of $11.5 billion ($14.5 billion gross energy tax
cuts, less $3 billion of energy tax increases). The act
included tax incentives for energy efficiency in residential
and commercial buildings and for more energy efficient
vehicles, and tax incentives for several types of alternative
and renewable resources, such as solar and geothermal.

The current energy tax structure is dominated by revenues from
a long-standing gasoline tax (which serves as a quasi user fee
for the use of the highway infrastructure), and tax incentives
for alternative and renewable fuels supply relative to energy
from conventional fossil fuels.

Although several additional tax incentives for conventional
fossil fuels and electricity were added, the act does not alter
the current policy stance favoring renewables on a Btu-corrected basis.