April - A Taxing Time!
For most of us, just the mention of April “taxes” our thoughts. Some of you may not have filed this year’s taxes yet, and you better get busy! As distasteful as tax time is, it might be worse if some folks in our government have their way. Let’s look at how two of these taxes are affecting your business now and how they may affect you in the coming years.
The first is the corporate income-tax rate, which is hurting corporations in the U.S. At 39.3%, the U.S. is second highest in the world behind Japan (39.5%). Other countries, such as Germany, had corporate tax rates as high as almost 60% in 1993, but they have decreased these rates by 36%. Another example is Ireland, which decreased their 1993 rate of 40% to the current 12.5%. This dramatic decrease has had a very positive effect on the Irish economy.
The second, and more insidious, tax is little by little trying to get a foothold. This is some form of carbon tax. While the U.S. government has heretofore resisted global efforts to impose taxes on our economic activity, state governors are increasingly taking climate-change legislation into their own hands. Unfortunately, the form of this legislation is very much in the mold of the top-down Kyoto Protocol restrictions. So far, 28 states have moved toward creating this type of top-down comprehensive strategy.
This remarkable uniformity from one state to another is due to the single national organization helping states to formulate their policies – the Center for Climate Strategies (CCS). The reason for this is that CCS’s services come cheap due to private funding of the organization. Unfortunately, while CCS claims to be objective, this private funding comes from a variety of groups known to be alarmist in their global-warming rhetoric.
At the federal level, it has been suggested by the chairman of the House Energy & Commerce Committee that Congress should seriously consider the imposition of a carbon tax. Al Gore had previously suggested to this committee that, “We should start using the tax code to reduce taxes on employment and production, and make up the difference with pollution taxes, principally on CO2 …” Unfortunately, those who propose a carbon tax on industrial production do not understand how this would adversely affect the industrial competitiveness of the U.S. Those of us in the thermal-processing industry have the most to be concerned about because of the nature of our work.
Even a modest cap-and-trade tax could increase a typical family’s electricity and gas bill by $365 per year or more. Obviously, the impact on individual commercial and industrial energy users could add up to millions of dollars. An MIT study indicates that the more stringent cap-and-trade taxes now being proposed would cause electricity prices to increase by 36%. Do the math for your facility.
The key in all of these discussions is whether humans are causing global warming. A review of our July 2007 editorial will give you some thoughts on this subject (available in our online archives at www.industrialheating.com). New scientific evidence seems to be pointing away from the long-term warming of our world. Little-reported data shows that the polar ice cap has recovered to near “normal” levels, and Arctic ice is now even thicker than usual in some locations. Did you know that January 2008 was the planet’s second-coldest January in 15 years? Obviously, facts like these call into serious question whether any government-imposed restriction of our economic activity (a.k.a. carbon tax) is needed. What would we hope to accomplish? And at what cost?
If you feel action is necessary, are there options, or must we accept the top-down, big-government strategy? One possible alternative is the Clean Energy Portfolio Standard (CEPS), which would mandate that utilities generate a portion of their electricity using renewable energy. It would also encourage them to pursue other clean-energy resources such as low-emission coal technology and advanced nuclear generation. There are other provisions as well, but most importantly, CEPS would directly promote conservation. Bottom line – CEPS would help transform the technological base of the utility industry, reduce reliance on imported energy sources and reduce CO2 emissions at very low cost.
The key is for those of us in energy-intensive industries to be aware of what is happening and get involved to do what is best for our industry and our country. If we don’t “vote” for a reduction in corporate taxes and oppose a carbon tax, many businesses – especially the energy-intensive ones – will seek greener pastures. Let’s fight to keep the domestic thermal-processing industry intact. Your job may depend on it. IH