Can Tax Cuts Beat Global Warming? My Tax Day Interview

Most people hate paying taxes, especially today, Tax Day.  So please check out and share my Tax Day interview below with NobleProfit's awesome CEO, Amy Seidman, for thoughts on how to save the planet by giving taxpayers a break on green energy investments.

Here is the YouTube Link: http://youtu.be/7B3pfmgdb5Y

Here is the CSRwire link: http://www.csrwire.com/blog/posts/801-noble-profit-can-green-energy-tax-cuts-help-beat-global-warming

Here is a version of the accompanying NobleProfit article:

NobleProfit Interview with Rod Richardson: Can Tax Cuts Beat Global Warming?

Most people hate paying taxes, especially today, Tax Day. In this video interview, Rod Richardson, the blogger behind Green Energy Tax Cuts, puts forward a planet-and-taxpayer-friendly idea: fight global warming by eliminating all taxes on green energy investments. Rod argues this will lead to a massive influx of new investment in clean energy, and produce less pain and more prosperity than any existing policy alternative, with an appeal across party lines... because it won't cost taxpayers a dime.

The Green Energy Tax Cuts proposal fuses a traditionally liberal passion about global warming and clean energy with a traditionally conservative love of tax cuts and supply side economic policy. In this interview, Rod explains some of the barriers to liberals and conservatives coming together on this issue, and shows a possible avenue toward political consensus. He also explains why it is painless and far more effective to grow the clean energy sector rapidly by eliminating all investment, capital gains and estate taxes on green energy.  Doing so would attract billions in new investment to successful business models, while other more punitive and costly approaches ultimately promote failure and attract opposition.

Why Green Energy Tax Cuts?

Given the name of my blog, it is not surprising this is the question I get most often.  

Of course, when asked by a progressive, it means: why tax cuts instead of direct subsidies, mandates, carbon taxes, etc.? When asked by a conservative or libertarian, it means why incentivize alternative energy at all?

There are several good reasons to support supply side tax cuts for clean, renewable energy... and different reasons depending on your political orientation, I might add.

For instance, Milton Friedman once said "I am in favor of cutting taxes under any circumstances and for any excuse, for any reason, whenever it's possible." So for true Friedman fans, forget global warming, forget foreign oil dependency, this argument is the clincher: it is a TAX CUT. As such, the net benefit to the economy from cutting taxes will be positive. If, as many free market scholars argue, cutting taxes is the best thing to do right now for the economy, then cutting some taxes is the next best thing.  You do what you can.

However, if you are asking "why promote alternative energy at all?" then I defer to the folks, left and right, talking about the negative externalities of fossil fuels:  global warming, economic and strategic vulnerability (and hard costs) arising from oil dependency, national security considerations, many sorts of pollution, depletion of finite resources, etc.  Some of these folks may even be neo-cons like Daniel Pipes and Frank Gaffney.  I am not trying to judge, promote or add to those arguments, other than to say that they are serious, and the consequences of dismissing these concerns, if wrong, could be bad.  Prudence dictates that if something can be done to promote alternative energy and lessen the social costs and risks of fossil fuels, if it would do more good than harm, then it would be better to do it.

If you are asking "why specifically supply side tax cuts for green energy?  Why not direct subsidies, mandates, carbon taxes, etc.?" the answer is that, if it seems something must be done, supply side tax cuts are the least harmful, most beneficial of all possible incentives for green energy.  Tax cuts are usually a net positive for the economy as a whole, while direct subsidies, increased regulation and taxes on carbon (or anything) are all economic depressants. (For more information see: the argument against direct subsidies, and the argument against carbon tax schemes and over-regulation.  Coming soon: a FAQ.)

Therefore, if the political majority of the US has decided to promote alternative energy for whatever reason (as seems to be the case) supply side tax cuts is the best way to do so.  For those who wish to promote alternative energy, it is the only way to promote success, not failure.  But even for those who do NOT wish to promote alternative energy, it is still the best middle ground compromise that is (a) cheaper and better for the economy that any of the alternatives (carbon taxes, direct subsidies, increased regulation and mandates), and (b) sure to not waste money on failures, sure to only benefit the most successful, profitable alternative energy business models.  Further, it is the only kind of incentive whose disappearance will not spell disaster, that will not create unsustainable, dependent corporate subsidy addicts.

But there is another, even more important reason to support green energy tax cuts:  They can help heal the left/right schism in America.  This is a win-win solution that both lowers taxes and helps the environment, that replaces costly subsidies, taxes and regulations, that combines both environmental and libertarian concerns.  That sets the stage for more to come.

For the right, it is a great way to teach the left to love supply side tax cuts. The left and much of the political center believe, erroneously, that supply side tax cuts are a boondoggle. Think of this then as a much needed demonstration project showcasing the power of such tax cuts to foster investment and successful, profitable innovation in an area near and dear to the heart of the left.  It could help set the stage for across the board supply side tax cuts.  The big win for the right here is a possible thaw in the left's perception of supply side tax cuts as a result of this policy, and a willingness to replace costly, harmful big government approaches with free market approaches similar to this.

For the left, the promise of supply side tax cuts it is a great way to garner support from the right for environmental and alternative energy concerns.  The big win for the left here is that left's abiding humanitarian concerns may become more palatable to the right if presented in a manner that reduces taxes, subsidies and regulations, allowing for further humanitarian progress in other areas following this model, such as health care. 

For America, the ultimate big win of adopting solutions like this would be the restoration of something similar to the 18th-19th C. Liberal consensus, that combined a passion for freedom and free markets, with a powerful appeal to justice, rights, equality and humanity.  That 19th C. consensus has largely fractured into two sets of concerns, claimed respectively by the the right and left of today.  Restoring that consensus would mean smaller government, lower taxes, cheaper, more efficient environmental and humanitarian policies, greater prosperity.

Supply side tax cuts for green energy can lead to: (a) competitive alternative energy companies that can stand alone, with zero taxpayer dollars wasted on incentives for failures; (b) a revitalized auto-industry; (c) a right/left thaw, a new liberty-with-humanity consensus leading to more efficient, cheaper, sustainable incentive-based social policies; (d) broad supply side tax cuts for the whole economy; (e) smaller deficits and ever more balanced budgets.  I expect, as profitable alternative energy companies emerge, tax preferences will be reduced. 

Green Energy Tax Cuts in the New York Times!

Woa. The New York Times has published my letter about supply side tax cuts for green energy in Saturday's paper, print and online.  What a pleasant surprise!

Editor Sue Mermelstein did a great job slimming down my original letter (similar to my last post) yet making it somehow better.  Boy, I wish I had an editor.

The letter responds to last Friday's article, "A Gold Rush of Subsidies in Clean Energy Search."  The letter can be read in The Times online, or, well, here:

To the Editor:Your article does a great service in detailing the oversubsidization of alternative energy, but doesn’t mention the biggest problem with these kinds of direct subsidies: They are addictive and create long-term corporate dependency. What happens when budgets get cut and the subsidies run out, as happened in Spain? Complete collapse. 

There is only one sustainable way to support alternative energy; only one way to reward success, not failure; only one incentive whose disappearance does not spell disaster: supply-side tax cuts for green energy. That means elimination of corporate taxes, capital gains taxes, sales taxes and estate taxes for clean, renewable energy investments. 

Such tax cuts promote success, not failure, because they benefit only companies with sustainable revenues and profits. Investors would be encouraged to invest in such businesses because their profits will be tax-free, a huge advantage over other investments. 

We have directly subsidized enough alternative energy start-ups in the United States. We have already rewarded failures like Solyndra. Now we need to separate the wheat from the chaff. 

With supply-side tax cuts for green energy, the most competitive, profitable alternative energy models will survive, thrive and attract more capital, and unsustainable models will disappear. 

R. RANDOLPH RICHARDSON
New York, Nov. 13, 2011

 I'm very glad The New York Times, my home town paper of record, thinks green energy tax cuts are an idea worthy of further public airing.  Since I call my self a centrist (indeed the 21stCentrist) it is nice that I actually do get support from all sides for these ideas.

Over Subsidy, or Wrong Incentive?

The New York Times had a great article yesterday about the over-subsidization of alternative energy.  But the authors fail to mention the biggest problem with these kinds of direct subsidies for alternative energy.  They are addictive and create long-term corporate dependency on public subsidy. They anticipate and therefor reward failure.  What happens when the subsidies run out, when the government goes broke, budgets get cut, as they did in Spain?  Complete collapse of these kinds of subsidized industries.   They blow away like chaff in the wind.

There is only one sustainable way to support alternative energy, only one way that rewards success, not failure, where the disappearance of the incentive does not spell disaster: supply side tax cuts for green energy.  That means elimination of corporate taxes, capital gains taxes, sales taxes and estate taxes for clean, renewable energy investments.  Investors would be encouraged to invest in such businesses because their profits will be tax free, a huge advantage over other investments.  But that benefit is only realized by successful companies that can make a profit.  Only then does investment becomes keenly focused on finding and developing economically successful, competitive alternative energy business models, not unprofitable subsidy addicts.

We have directly subsidized enough alternative energy start ups in the United States.  It is clear we have already rewarded failures like Solyndra.  Now we need to separate the wheat from the chaff.  It is time to switch the incentive structure to find and reward the winners.  With supply side tax cuts for green energy, the most competitive, profitable alternative energy models will survive and thrive and attract private investment on their own merits, and unsustainable models will disappear.

The problem is not just over-subsidization.  It is the wrong incentive structure entirely.