A new report out from the Center on Budget and Policy Priorities last Friday explores the use of economic stimulus packages (i.e. tax cuts) at the state level, which have been proposed in seven states. CBPP concludes tax cuts are not an effective economic stimulus at the state level, and may in fact hurt state economies. From the report: Policymakers in many states are proposing tax cuts or rebates that they hope will "stimulate" their state economies, often citing the federal stimulus bill as both a model and a reason to support such a plan. Leaders have issued such proposals in Alabama, Arizona, Connecticut, Florida, Illinois, Pennsylvania, and Wisconsin, among others. But state tax cuts would do little or nothing to boost a state's economy. In fact, they reflect a misunderstanding of how state governments can best respond to a recession. The report outlines six recommendations for actions states can take to boost their economies. CBPP: FISCAL STIMULUS AT THE STATE LEVEL

Senate Budget Committee Chair Kent Conrad (D-ND) has outlined an alternative route to Senate passage for the alternative energy tax incentive bill described below. Including these tax provisions in the budget reconciliation instructions allows them to pass the Senate with a simple majority vote, rather than the usual 60 votes needed to avoid a filibuster.

Following up on Dana's blog last night about President Bush's promised veto of energy legislation moving through Congress, Donny Shaw over at Open Congress provides an excellent rundown of the key arguments from opposing sides on this bill. The main reason the legislation has generated so much controversy is that it would repeal tax breaks for oil and gas companies who drill on public-owned coastal waters. What is disturbing is that the tax incentives given to the oil and gas companies don't work. A New York Times article from 2006 details an report produced by the Department of the Interior that found the incentives would only marginally increase production of oil and gas over the next 40 years or so - about 300 million barrels (or about 1 percent) more over that time than if the incentives did not exist. Increases in gas production would be even less - closer to half of one percent. But the costs are enormous - between $40 and $50 billion less in royalty payments to the government for drilling on public land. And as we've noted before (here and here) the Department of the Interior has already screwed up collecting the royalties it should receive under this program, allowing oil and gas companies to keep tens of billions of dollars that should have been put to public use - not private profit. And those profits are still rolling in. Most large energy companies who benefit from this tax break are not hard up for cash to invest in drilling and expansion of production, particularly oil companies. ExxonMobil made over $40 billion in profit in 2007 - the most ever by a U.S. company. Do we really need to be mitigating the risk for oil exploration for a company so flush with cash that is almost definitely going to explore anyway? Is that the best use of federal resources that belong to us all? The president's veto threat also brings into question his often-stated goal that the federal government should not spend public dollars on program that don't show results. This particular program has shown, based on the government's own studies, to be wasteful and unsuccessful. Why then is Mr. Bush threatening to veto a bill ending the program and shifting those resources to generating production of reneweable energy? (Btw, the oil and gas industry contributed $2,596,725 to the president's 2004 campaign in total. Hmmm...) Image by Flickr user xitus used under a Creative Commons license