Obama's New Tax Idea: the Accidental Anti-Cap-n-Trade

President Obama’s imminent proposal to allow businesses to expense capital equipment purchases through the end of next year is something my colleagues at CEI, particularly Marlo Lewis, have been advocating for some time. Not as “stimulus”, mind you (though it should have some stimulative effect, which is not to condone the refusal to maintain current tax rates — that is, insistence on raising tax rates — as of January 1). But as a greenhouse gas emission reduction scheme.

The logic is simple and the Dutch actually showed (again, accidentally) how this works to reduce emissions: business do not replace capital equipment as early or often as they might like because the tax code disincentivizes it, with depreciation schedules instead of treating it like other business expenses. They therefore postpone purchasing newer, more efficient (and typically more energy efficient) equipment.

Change that, and they will pull through new technology into use.

In a way that is moving investments forward, a la cash for clunkers. But in other ways it is just smart and the right thing to do.

Here’s the downside: yes, you get emission reductions and not by harming economic growth, but actually encouraging it. However, the political class do not get to reward their constituencies with cap-n-trade wealth transfers from you and me to them, don’t increase the cost of energy, and obtain no new control over our lives.

And as many of you know, that is the whole point behind the scheme urgently needed to combat “climate change” (why not continental drift?) that actually would have no detectable impact, according to anyone, on climate.

For these reasons, President Obama will never accept an argument that adoption of this latest stab at state-orchestrated and temporary stimulus qualifies as the “doing ‘something'” his team and the rest of the enviros run around insisting is imperative. But, as the Washington logic goes, if we must “do ‘something'”, well, this is ‘something’, so let’s just do this. Keep your treaties and energy rationing schemes that, like this, would according to no one actually impact the climate, and declare victory, having done no harm and actually some good.

I’m kidding of course. These people work in Washington. But it is worth mentioning as we go forward that there are other ideas, ones that now even Obama acknowledges are economically beneficial, contrary to cap-and-trade which he boasted is designed to cause energy prices to “necessarily skyrocket”, “bankrupt” politically disfavored industries, and “raise billions of dollars.” This does none of those things. So, which would you choose? If you know, let your elected representatives know, too. Use this moment to inform, persuade, and advance the debate.