Someone in the Wyoming legislature came upon the idea that he and his fellow elected officials could cut budget deficits by taxing wind power production. The state is something of a mecca for the alternative power energy industry because of its flat landscape, the high wind off the Rockies, an abundance of sunshine and inexpensive land for solar power installations, and plentiful natural gas in the ground.

The New York Times reports that the proposal for the wind tax was first championed by the governor and involves a $1-per-megawatt-hour levy. The newspapers says knowledgable sources believe the state will benefit by as much as $4 million a year. That math works if it does not drive some of the wind energy companies out of the state or undermine their profits enough to damage their capacity for expansion.

The news is a nearly perfect example of the friction between states and the federal government as the states grab for any revenue they can to close budget deficits and Washington spends hundreds of billions of dollars for energy infrastructure and alternative energy enterprises to cut the use of fossil fuels. The federal government will help fund the expansion of wind power while Wyoming, and perhaps other states, tax the companies that produce it.

The news also strengthens the argument that the federal government may have to give direct financial aid to states either in the form of direct loans or bond guarantees. Part of the President’s $787 billion stimulus package is aimed at helping state governments, but it is far from clear that the process is working. At the National Governors Association meeting the group said that state deficits would increase from over $50 billion in 2011 to above $60 billion in 2012. A tax on wind power may appear regressive, but states in trouble are likely to do what troubled people or enterprises often do and make short-term decisions with long-term ruinous effects.

The federal government cannot improve the economy if every dime it puts into state economies is taxed as it improves business revenue and personal incomes. Washington might as well increase state aid directly. It is a shorter road to the same destination.

Douglas A. McIntyre

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