The Hayride

SADOW: Tax Breaks, Solar Panels And Corporate Greed

SADOW: Tax Breaks, Solar Panels And Corporate Greed
October 23
09:35 2012

The Louisiana Legislature’s Revenue Study Commission grinds on, with its most recent review revealing greed, arrogance, and presumption of the highest order.

The legislative panel is investigating the utility of tax breaks granted by the state, with an eye towards eliminating those that do not sufficiently bring benefits to the state. One of the most egregious offenders in that regard is the absurdly generous credit given to solar panels that enriches few at the expense of the people.

On top of a generous federal tax credit of 20 percent, the state in the waning days of the Gov. Kathleen Blanco Administration passed a law that lards on another 50 percent for solar or wind construction for the first $25,000 in expenses (most installation costs will go above this level, many way above it). The most recent figures indicate that costs $13 million a year, and the generosity is such that the forgone dollars are expanding rapidly.

And the only reason significant growth has occurred in this area has been because of large scale state government redistribution of resources to a small segment of homeowners and the solar energy industry. With among the lowest energy costs in the country with an average cost of 7.8 cents per kWh, the average savings for a Louisiana residence using solar is only $230 a year. Being that a system may cost 200 times that (and does not include the occasional maintenance costs such as panel failure, breakage, removal and reinstallation for roof repair, etc.), except for palatial residences it would make no sense whatsoever on a cost recovery basis (discounting any feel-good ideological benefits an homeowner might enjoy) to go solar without these credits.

Also worth noting, this tax credit accrues only to wealthier households. Savings and costs as they are, there’s little incentive for lower energy users to employ this strategy even with tax credits, who in any case don’t even have the income to use all of the credits immediately and would have to spread them out over years. Even with the credits used by higher-income, higher asset households, 20 years is a typical payback period.

Yet some act as if it’s their divine right to have taxpayers subsidize their chosen lifestyle. Particularly loathsome was the attitude expressed in front of the committee by Tucker Crawford of the Gulf States Renewable Energy Industries Association, a trade group (and solar installation is his trade), who, in response to the suggestion by Public Service Commissioner Clyde Holloway that these credits be scaled back, whined that this would cost “hundreds, even thousands” of indirect and direct jobs.

But why should government pick the solar industry as a winner and transfer taxpayer wealth to it when it brings so few demonstrable benefits to taxpayers compared to the wealth absconded from them? To use a previous example, the state could do the same for propagators of the McKayla Is Not Impressed meme, creating all sorts of jobs but with economic costs far exceeding the benefits. A much wiser use of resources would be, rather than creating incentives to have people engage in a very inefficient economic activity, not to distort the market and to allow people to follow market signals to spend and invest that money in activities that promise much more favorable benefit/cost ratios, which in the end will create more economic activity, jobs, and wealth than the current approach.

Except in Crawford and his ilk’s chosen industry, and that’s why they’re upset because of the interference with their greedy impulses. There’s zero reason for Louisiana to encourage such inefficient use of resources; the market will give the appropriate signals that one day may make solar cost-effective and leave the choice to purchase up to the citizen without dragging the citizenry’s resources into it. But it’s not now, and while Holloway talks of scaling back the credit, the smartest thing to do would be to end it.

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