Bentzen’s Blog

Hey Mr. Taxman
by Brian Bentzen

“Government’s view of the economy could be summed up in a few short phrases: If it moves, tax it.  If it keeps moving, regulate it.  And if it stops moving, subsidize it.” — Ronald Reagan

This is my pledge.  I will pay as little tax as possible.  This will be my mission for the rest of my life.  I will endeavor to contribute as little as I can to my government’s coffers while creating as much value as possible in the real world.  This year, I will max out my retirement account and live frugally.  I will donate my old stuff to charity.

Unfortunately, I can’t avoid FICA or state and local tax, or real estate tax, and my share of corporate tax, and the taxes on the gas used to transport my goods and so forth.  And I can’t get into the 0% tax rate unless I refuse to pay altogether.  This would put me in prison and cost taxpayers $50,000 a year.  I don’t want to contribute to the problem.  I just want to not contribute more than required.

But what about going one step further?  What if I were to go after tax credits?  I could install solar panels on the roof for $25,000.  Uncle Sam would give me 30% and Pennsylvania 35%.  That’s quite a tax credit.  The solar power would reduce my bill to approximately $0 a month, and PPL would pay me for any excess power generation at the retail rate.  With rate caps expiring this seems like quite a deal.  But there are some problems.

In a free society, government does not interfere with the free market capitalist economy.  Solar incentives, like all tax incentives, help the government to control the economy.  In this case, the solar subsidy will increase the supply of energy while decreasing demand.  The cost of electricity should theoretically decrease.  Demand for solar panels should increase and supply should increase as well in response to the increase in demand.  What does this accomplish?  The goal may be to make more green energy.  It might be to reduce dependence on foreign oil or coal.  It might be to decrease greenhouse emissions.  The result, however, is a solar industry that is artificially inflated.  When the subsidy goes away, if the subsidy goes away, what will happen?  The solar producers will have lower demand, increased supply and as a result they may have difficulty turning a profit.  Meanwhile, your tax dollars are being invested in businesses that should be investing in themselves.  Your money is being spent on my rooftop accessory.

While I agree that a new set of solar panels on my roof would be likely to greatly increase my cashflow, why should you give that to me?  I would like to increase my cashflow, but everyone who doesn’t have solar panels will have decreased cashflow due to my desire to save a few bucks.  Likewise, your tax dollars might go to the development of a solar power plant.  The cost of this power plant may already be less than the cost of providing electricity from a coal burning plant.  The solar technology is sitting on the edge of profitability now.  At $1/w production cost, solar energy becomes cheaper than coal.  Nanosolar and First Solar are among the few companies who can produce cost efficient solar paneling.  Nanosolar reports that it has already sold its next 12 months worth of production and is working to increase production capacity.  If the electric company can already make a greater profit from buying solar panels, why should the government subsidize their investment?

The free market best allocates resources.  When government intervenes, resources are redistributed according to those who are sitting in power.  In this case taxpayer resources are being transferred to me and to electric companies.  The system is designed so I can get solar panels on my roof at your expense.  The programs are designed so your electric company can increase their profits at your expense.  If this is just, why is it so repugnant?