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Red, White, and Ready: The Patriotic Push for Energy Legislation

After 10 years of waiting, some experts say a Republican-controlled Congress and a patriotic mood will make the difference in passing energy legislation this year.
Fortnightly Magazine - May 1 2003

a coalition of Western business leaders that make up the Western Business Roundtable introduced an alternative plan to FERC's SMD. The "Western Market Design" (WMD) would empower Western states, rather than FERC, to take the lead in mapping the future of the Western wholesale electricity market. The coalition hopes the proposal will act as a model for other regions. The plan is intended to "provide a more regional approach to market design and get the country moving forward again on a path to increased investment in our electricity infrastructure system," said Jacob Williams, roundtable chairman and an executive with Peabody Energy.

A Tauzin amendment, meant to assuage a group led by Rep. Charles Norwood, R-Ga., was added to the House bill passed out of committee on April 3, and it addresses SMD. The new section will not allow states to opt out of SMD, but it does protect native load customers from federal regulation.

Sen. Domenici at the same time was adding language to the Senate's energy bill to allow for opposition to SMD.

Dividend Taxation: A Hard Sell?

Utility companies, which tend to be large dividend producers, strongly back President Bush's proposed repeal of the dividend tax. But Fox-Penner says utilities are just one of the factors in the debate over repeal of the tax.

Cole Kendall, vice president of Economic Strategies, called the dividend tax issue "a tough one."

"Basically as I see it now, the president has 19 things on his plate that he has to get done," Kendall says. "The first half is the utility tax, but number one clearly is the war with Iraq. I assume if Iraq ends and if N. Korea doesn't start and if the economy perks back up after Iraq, then he'll go full press on the repeal of the dividend tax and probably get it through," Kendall says. "I don't quite know how he got the last tax cut through, but he did, and the odds favor that once he sets his mind to it, it does go through. The only question is, will he clear the agenda so he can focus on this before June?"

But opinions on the chances for dividend tax repeal vary along party lines. Robert Shapiro, managing director of Sonecon LLC, fellow at the Brookings Institution, and former undersecretary of commerce for economic affairs in the Clinton administration, believes the chances of outright repeal are very small, and that dividend tax repeal will take away from other asset classes such as municipals and other tax-free investments.

The chances of a reduction are better, but not at all certain-probably less than 50-50. "The fact is with large deficits looming, and a war, a large tax cut doesn't make sense to most people," he said. "The president doesn't even have united Republican support for this. As economic policy, it really makes very little sense, and even as tax policy it is very badly designed," Shapiro says.

But Shapiro does believe the double taxation of dividends should be addressed. "The fact is some dividends are taxed twice, some dividends are