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Extension of remarks

After my lunchtime post, I had some additional reaction from reader J.M., discussing in more detail Delaware vs. Maryland energy policy. This is just slightly edited for brevity:

I don’t know if you are keeping abreast as to what is going on in Delaware regarding Renewable Energy initiatives.

But DE has been paying for a number of years now $31,500.00 maximum or 50% per each residential installation for photovoltaic(s). In addition, they are paying 50% of the entire installation (with) a maximum of $250,000 for commercial.

Moreover, they are paying $600/ton for installation of high efficiency HVAC 15 SEER or more (with) a maximum of $3,000 per residence.

The story gets better, I guess you’ve heard of Bluewater’s proposal for the offshore windfarm. They are also moving briskly towards electricity generation on a grander scale.

Now as for Maryland – once again, I have been invited to testify on numerous energy bills during this past legislative session, but I’m happy to report that I’ll not be attending any of them. Why, you might ask? Because this would have made the 4th consecutive year that I would have wasted my gas and time to speak (to) deaf ears.

It isn’t any one party’s fault for lack of an energy policy. I tag the…fault to a totally dysfunctional State as it relates to implementation of Renewable Energy Initiatives. (Emphasis in original.)

So we have a good idea of what J.M. thinks. However I also wanted to take the opportunity of this post to extend something I remarked on this afternoon as well. As I stated:

I don’t have a lot of objection to HB377…except for my longstanding objection to tax legislation being used to pervert market forces.

To see what else I think about it, you’ll have to continue past the fold.

After writing that I decided it may be a good idea to further this thought. There are a number of ways that business can take advantage of the government and by extension the taxpayer. In this case, government is using the incentive of a grant or tax rebate to shift the playing field of home energy sources toward the use of solar collectors or geothermal heating and placing a disadvantage on electric and natural gas providers. Somewhere there was a lobbyist for the solar and geothermal industry who talked a legislator into introducing this bill originally in order to secure an advantage for the lobbyist’s client company or group.

Similarly, every day government at all levels works at the behest of a particular business or industry to create some sort of advantage for themselves. A couple years ago my adopted hometown of Salisbury created a controversy for itself by allowing tax increment financing to a developer in order to redevelop the site of the former Salisbury Mall – while the mall has recently been demolished as promised, the new construction has not yet begun while the tax increases endured as part of payment have commenced.

We also see this on a regular basis when a large corporation such as an automaker decides it would like to build a large assembly plant someplace in America. States trip over themselves to secure these plants by offering up multi-billion dollar packages which include tax incentives, making the bet that the plant will not just employ thousands of wageearners whose payroll taxes would make up for the lost corporate taxes, but spinoff entities then create thousands more jobs and even more revenue. Sometimes these packages pan out magnificently, but oftentimes the jobs created fall short of expectations and taxpayers get stuck holding the bag while the corporation adds to its profitability. It also skews the market to some extent as other competitors who didn’t get those sweetheart deals have to find a way to make up for the disadvantage, perhaps holding one of their plants as hostage to local governments with a threatened closing if they don’t get a similar pact.

Corporate interests sometimes choose another angle to gain advantage. Similarly to the solar and geothermal bill above but without the individual tax incentives, companies try to game the system through regulation, a practice called rent-seeking. Fellow Red Maryland contributor and Maryland Blogger Alliance member Mark Newgent has been doggedly looking into this in recent weeks on his website The Main Adversary, with an emphasis on the “Global Warming Solutions Bill” scam (a recent example is here); while a good, quick primer on the concept by Thomas Firey can be found on the Maryland Public Policy Institute site.

Sometimes government can create a disincentive as well. Last week a story ran in Business Week (I found it on the MSN site) that talked about “Why Exxon won’t produce more oil“. While the story charged that Exxon/Mobil is being managed solely to maximize profit, one point I saw as key was that Exxon simultaneously was predicting more production in regions like Russia, Africa, and the Middle East but less production in North America and Europe. Where are the most onerous restrictions for exploring? You guessed it, North America and Europe. (By the way, as an XOM shareholder I don’t mind them making a profit, not that the whole nine shares I bought would allow me to retire on the dividends tomorrow.) Some of those restrictions have been placed by entities interested in alternative energy in order to hamper efforts at utilizing the oil we have. (I know oil companies get breaks here and there as well, so don’t start with the conspiracy theories. You all should know where I stand on oil drilling though.)

In a perfect world, all governmental entities would stay out of the free market but we know that’s not realistic. Even by the Constitution (Article I, Section 8 ), Congress is allowed “To lay and collect Taxes, Duties, Imposts and Excises” and “regulate Commerce…among the Several States.” They certainly have taken advantage of that power, and those Several States followed close behind. But to the extent that it’s possible, trying to put this genie back into the bottle is worth attempting because with a more level playing field innovation is encouraged, benefitting all of us.

Crossposted on monoblogue.

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