Yet another episode in the drama that is the renewable-energy tax-credit extensions. Last week, Senate Minority Leader Mitch McConnell (R-Ky.) sent a letter [PDF] to Majority Leader Harry Reid (D-Nev.) and House Speaker Nancy Pelosi asking that the Democrats agree to spending cuts in order to fund the extension of tax credits for renewable energy.
In the letter, McConnell says he “would like to focus on areas of bipartisan agreement in order to break the impasse on these time-sensitive tax matters.”
The Senate has been in a lock for some time now over the extensions, which would maintain the tax credits for wind, solar, and other renewable energy sources. The extensions themselves are pretty popular across the board, but the battle is over how to pay for them. Conservative “Blue Dog” Democrats want to ensure that the measure includes some sort of “pay-for” — a provision that would either cut spending or shift taxes to fund the credits. Republicans argue that there’s no need for new tax revenues to offset this extension. Hence, a stalemate thus far.
The first version of the legislation extending the tax credits would have paid for them by revoking tax breaks for the oil and gas industry, but that wasn’t very popular with Republicans in the Senate. A second version would have paid for the credits by closing what Democrats call tax “loopholes” for hedge funds and multinational corporations, which also wasn’t very popular with many Senate Republicans. Now McConnell says the Republican caucus will be willing to move forward if the pay-fors come from spending cuts or revenue raised via “appropriate” tax proposals.
“In exchange, the House and Senate Democratic Leadership would revise the desired new non-defense discretionary spending in the 2009 congressional budget downward to a level sufficient to offset the cost … of extending expiring tax relief,” wrote McConnell.
There’s no definition of “appropriate” in the letter, and most Democrats would argue that the previous proposals have been “appropriate.” But this does signal an opportunity to break the impasse and ease anxieties in the renewable-energy industry.