Daily Archives: 25 July 2013

Federal Climate Plan and Crony Capitalism

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George Russell, writing for Fox News, had this on the efficacy of President Barack Obama’s national plan to fight “climate change:”

a separate, groundbreaking study by the National Research Council has warned that those kinds of subsidies are virtually useless at quelling greenhouse gases .

The study, which looks at the subsidies and other incentives embedded in U.S. federal tax law after the past several years of climate change initiatives, concludes that they  have done little or nothing so far to cut U.S. contributions to global carbon emissions, and are unlikely to do much more before 2035, the project’s research horizon.

And

[T]he study declared that “their combined impact is less than 1% of total US emissions” over the next 25 years, and they are a lousy bargain to boot:  “Very little if any GHG reductions are achieved at substantial cost with these provisions.”

[T]he study concluded “current tax expenditures and subsidies are a poor tool for reducing greenhouse gases and achieving climate-change objectives.”   They “achieve small reductions in GHG emissions and are costly per unit of emissions reduction.”

The full cost was something the study was unable to make entirely clear.  It estimated that the federal government had spent some $48 billion in just the past two years on “tax expenditures”—meaning subsidies, credits, and other incentives—related to the energy sector, and also noted that few were specifically enacted to reduce greenhouse gases.

Obama’s plan also ignores the erroneous nature of its assumptions about what is a significant GHG.  It includes all of their assumed GHGs, for instance including atmospheric CO2….

Worse, for the short term,

[T]he probe underlined how little is yet known about the relationship between government tax-and-spend activity and actual climate change results, especially as government spending gets embedded in a growing thicket of regulations and initiatives created to solve different parts of the greenhouse gas puzzle, but all touted to achieve the same ends.

And

[T]he plan also calls for $7.9 billion in additional funding for advanced clean energy technology, a hike of about 30%.  This includes investment in a range of energy technologies, from advanced biofuels to nuclear mini-reactors.

Never mind that this is a waste of money.  If the technology can’t compete in the free market without subsidies, it’s not commercially viable.  And so does not warrant subsidization—assuming government subsidies are ever appropriate.

The ludicrosity goes on, but you get the idea.

It’s hard to believe that Obama and his colleagues in the Executive Branch and allies in the Legislative Branch didn’t know this stuff a priori; earlier studies, for instance, have debunked the very concept of serious human impact on evolving climate.  But he, and they, do know full well the pecuniary benefit of this plan for the plan’s recipients.

The study itself can be found here.

A Thought on Global Tax Reform

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UK Chancellor of the Exchequer George Osborne said he hoped the G-20 countries would commit to the [OECD plan to close international tax law loopholes].

And

The plan aims to plug the gaps created by a complex web of bilateral tax treaties that has expanded since the 1920s, and which now allows for “aggressive” tax planning, where companies adopt legal structures designed to shift their profits to the lowest-tax jurisdictions, regardless of where those profits are earned.

“These gaps have facilitated tax planning by globalized players.  The goal of the action plan is to close down the avenues that we have left open,” said Pascal Saint-Amans, director of the OECD’s Center for Tax Policy and Administration.

And

The UK Parliament’s public-affairs committee has held a number of heated public hearings over the past six months examining whether large companies are paying enough tax.

Never mind that of course business executives engage in careful “tax planning”—they have a fiduciary duty to their bosses, the business owners, to minimize costs and maximize profits.

Nor is there any consideration of whether the G-20 nations (other than, say, Ireland) are charging too much in the way of taxes, cynically without justifying governments’ claimed need for OPM.

And this from Ángel Gurria, OECD Secretary-General.

Although of course we do not expect [businesses] to very happily go there and deposit their more substantive check, I think they will understand that this is a way to keep the systems running better and the trains running on time.

Shades of Alexander Hamilton:

There are some who maintain that trade will regulate itself and is not to be benefitted by the encouragements or restraints of government.  Such persons imagine that there is no need of a common directing power.  This is one of those wild speculative paradoxes among us, contrary to the uniform practice and sense of the most enlightened nations.

As Adam Smith and the empirical evidence of the US’ experience until the early 20th century have shown, Hamilton was wrong then, and Gurria is wrong today.

Here’s a thought: standardize on low/no corporate tax rates.  It’s not government’s money, anyway; the money is the property of the companies and the people who own them.