Supply-Side Environmentalism

Down with cap-and-trade, up with green-energy tax cuts!

By Deroy Murdock
Monday, July 6, 2009

You cannot fight something with nothing. This simple fact should be chiseled in stone above the House and Senate Republican cloakrooms.

House Republicans energetically debated the cap-and-trade bill’s myriad shortcomings last month. Alas, they never presented a riveting alternative that would have rallied free-marketeers and further split Democrats, who lost 44 members as the House considered this 1,428-page, $864 billion monstrosity on June 26. (An online PDF of this legislation warns: “This bill is very large, and loading it may cause your web browser to perform sluggishly.”) Meanwhile, this Republican lack of vision permitted eight GOP jellyfish to plop onto Democrats’ laps, assuring the bill’s narrow passage, 219 to 212.

Rather than merely slam this horrid bill, Senate Republicans should push a superior idea that could kill its momentum: green-energy tax cuts.

Manhattan philanthropist R. Randolph Richardson is among my MBA classmates at New York University’s Stern School of Business. He promotes this concept through his website, GreenEnergyTaxCuts.com.

“Supply-side environmentalism is what my proposal entails,” Richardson tells me. He argues that the best way to stimulate clean energy is not through the Democrats’ complex and costly maze of regulations and subsidies, but through radical — albeit focused — tax relief.

“Make all green-energy technology 100 percent tax free,” Richardson advises. He wants “no sales or income tax on revenue from clean, renewable energy or technology (like plug-in, flex-fuel hybrids) that radically decreases oil consumption. No tax on the interest on loans for green-energy investments. No capital-gains tax on companies’ stocks and dividends in proportion to the percentage of their revenue that comes from green-energy technology.” Richardson believes this estimated $300 billion annual economic injection would “supercharge private investment in clean and renewable energy technologies.” This potentially could launch millions of jobs, he adds, “many more than you could create by federal spending alone.”

Presumably after solving every other pressing problem he faces, President Obama unveiled new federal light-bulb standards on June 29, though he conceded, “Light bulbs might not seem sexy.” Rather than rely on such federal edicts to steer innovation with a whip, green-energy tax cuts simply would dangle the shiny brass ring of tax-free profits over the heads of inventors and entrepreneurs and encourage them to snatch it.

Green-energy tax cuts, Richardson predicts, “will encourage oil and coal companies and utilities voluntarily to go green, in order to escape taxes. A carrot frequently works better than a stick.”

Whether this idea would slash net tax receipts depends on its scope. Cancelling taxes on carbon-free energy revenues could eliminate the federal tax bills of existing wind- and nuclear-power companies, for instance. The Treasury certainly would witness a sudden decline in such firms’ tax payments, although higher overall tax income could offset that shortfall as the national economy responds to increased energy supplies and, thus, decreases power prices.

Imagine, however, that someone creates a brand-new fuel that lets cars get 75 miles per gallon. Better yet, it’s made from each autumn’s crop of fallen oak leaves. This genius could sell this miracle fuel tax-free. No cash would flow from the Treasury, since there is no budget line for revenue accruing from uninvented inventions.

Free-marketeers legitimately could oppose this idea. Green-energy tax cuts could be called an unnecessary sop to industries that should stand on their own. Supply-side industrial policy remains industrial policy.

More fundamentally, this idea gives aid and comfort to the monstrous lie of so-called “global warming.” The globe is cooling, and the sooner we all recognize that, the better. (Having survived the wettest and tied-for-eighth coldest June ever, New Yorkers laugh at “global warming.” For its part, Los Angeles International Airport never cracked 71 degrees last month. That is the lowest high for June since 1944 — the year they began keeping records there — the same month as the Allied Invasion of Nazi-occupied France.

Unfortunately, Washington Democrats are not that into tax relief. Supply-siders could do worse than present a tax-cutting antidote to the big-spending Left’s venom.

Best of all, green-energy tax cuts do what nearly every American public policy should: They follow the sage counsel of the late, great capitalist economist Milton Friedman. As he once said: “I am in favor of cutting taxes under any circumstances and for any excuse, for any reason, whenever it’s possible.”