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.