Tax Incentives in Inflation Reduction Act/Green Corporate Handouts and CCP

Finance: Tax Incentives in the Inflation Reduction Act: Jobs and Investment in Energy Communities, May 18, 2023

I am repeating my comments to Ways and Means of April 19th on the U.S. Tax Code Subsidizing Handouts and the Chinese Communist Party. The subject matter is the same in many respects, but the irony is thick.

WM: U.S. Tax Code Subsidizing Green Corporate Handouts and the Chinese Communist Party, April 19, 2023 

The Climate Crisis is real. It did not go away because La Nina rain events started again, likely due to the Tongan volcano disrupting the El Nino cycle. The fact that El Nino was stuck is likely due to climate change, however.

Florida is not saved by the new rains. Indeed, these have made coastal flooding caused by rising sea levels worse. That sea levels have risen due to arctic ice melt is definitely an artifact of global warming. If someting is not done, even The Villages will be under water before the century is out.

From comments presented to the Finance in April of 2021, on Climate Challenges On warming in general, there is no doubt that it is man-made. While there was a warm period around the first millennium, we came to it gradually. Industrialization may have ended what is called the Little Ice Age, but that warming is sudden and has dire consequences. We do not know that it will stop the way it did in the Middle Ages, indeed, it is not likely to, which makes these hearings vital.

Starting with the coasts, there will be sea level rise. Indeed, the flooding shown in Vice President Gore’s latest film shows how bad it is getting. The wealthy don’t seem to care, because they have flood insurance. The most basic step to at least get wealthier taxpayers on board (including the upper-middle class) is to cap flood insurance benefits to a level where beach houses properties  can no longer be insured. Even that small step could never be enacted. Too many donors have beach houses.

This is a bigger problem for some than the catch of the day, particularly in the Indo-Pacific region. In comments to the Finance Committee on Strategic Climate Engagement in the Indo-Pacific Region in March 2022 Warming in the United States is merely inconvenient. In the Indo-Pacific region, it will be deadly. Island nations and Bangladesh will simply be eliminated. This constitutes a large share of the global population. Java has 154 million people in the same space that the United States has 53 million in the Boston-Washington urban cluster. Visualize relocating them.

We agree that the current tax benefits for electric cars and renewables are the wrong approach. That does not mean that the oil and gas companies deserve a free pass, as I discuss below. There are alternatives that do not rely on Chinese wind turbines or solar panels. To be clear, the reason China produces these things is because their labor is cheap. It is so cheap that they are likely to have a Marxist revolution where the peasants rise up against the Communist Party.

Of course, such revolutions are stuff of myth. Without determined leadership, there are no peasant uprisings. Middle classes revolt, not workers. The Chinese economic revolution is creating a middle class as peasants in the countryside become peasants in the city, but without urban rights. One must actually own a home to have rights within the cities to health care and other human services. It harkens back to early America, where only White male landholders could vote. 

As the Chinese middle class grows, it has not been added to the Communist Party. This will result in a revolution against it. Corrupt parties find it hard to broaden the base. If they were to do so, Chinese leaders would develop a sense of humor, which is absolutely necessary to go beyond tyranny and into freedom. The Party will either modernize or be overthrown. Its recent rollback on Covid testing shows that it has become sensitive to keeping its middle class happy. Now that there is blood in the water, evolution or revolution is certain.

China makes solar cells and turbines because its labor is cheap - although it will not remain that way. Other nations will be cheaper soon, although hopefully they will be advised by someone other than the International Monetary Fund so that their populations can more eailiy develop into consumer societies with empowered workers.

China has pulled back on the Belt Road initiative. It has its own financial crisis so, instead of extending new credit, it is turned into a debt collector. Were it not for a desire to sell consumer goods (and solar panels) to the United States, it would sell its supply of Treasury Bills.

Let me emphasize this. Goods sold in WalMart and solar and wind energy systems have the same profit flows to the soon-to-be-overthrown Communist Party. To condemn one and not the other DOES NOT EXACTLY DEMONSTRATE CLEAR THINKING BY THE NEW MAJORITY.

The solution to both problems is tax policy. Not repealing the Biden tax policies favoring renewable energy, but our allergy to conforming to tax policy in the rest of the developed world. These policies are a boon to consumers, especially wealthier consumers who are also donors. They are  not so good for workers.

 If the United States had a goods and services tax, the wealthy elite could not avoid taxation by borrowing from their asset portfolios to fund consumption. To end this tax dodge, tax consumption. Taxing asset value gains at sale rather than taxing end of the year results also leaves money on the table, but that is a discussion for another day. Please see our paper on taxes and trade policy in the first attachment for how credit invoice AND subtraction value added taxes will impact both trade policy and workers. The second attachment lays out our entire tax proposal.

The Biden energy provisions are not even a drop in the bucket. They were a (successful) olive branch to Senators Sanders and Markey. Not much more. 

Burning gasoline has taken us over the line on warming, catching up with coal. The burning of coal, especially by China, creates acute pollution - the kind that gave me asthma when I lived downwind from an Ohio Edison Plant in Dayton, Ohio and the kind which your grandchildren will get if we continue to burn it. Coal is also a radiation danger. It turns out that when coal is burnt, more radioactive material is added to the environment than the entire nuclear power system emits.

Increasing nuclear power is an environmentally sustainable path, but it will only occur when the demand for more electricity rises as we move away from using gasoline in our cars. Getting this enacted is as likely, for now, as improving environmental and labor trade enforcement and limiting flood insurance. 

Employee-owners and forward thinking communities can step in where the market will not. In testimony to the Energy and Water Appropriations Subcommittee, I describe an experiment to build an integrated system for providing electric power for cars and trucks, while reinventing the grid, that relied on overhead roof decks to transfer power to vehicles in the same way electric trains and buses work. Please see an excerpt in the attachments. 

We don’t need to drill for or export more oil. We need much less. Electric vehicles run on roof covered overhead power lines (and with control from central computers) end the need to burn gasoline in urban areas WITHOUT the use of questionably resourced lithium ion batteries and without the need to expand our electric grid into the wind or by catching a ray of sunshine. Technology from 100 years ago, combined with the latest in nuclear energy can both clean the air and cool the planet down, and do so much more quickly than the entire Biden energy portfolio.

Attachment: Trade Policy Video

Attachment: Tax Reform Videos included

Attachment: Energy and Water Resources FY 2024