Phil Kerpen: Let electric vehicle subsidies die on schedule
With the $7500 tax credit for electric car buyers already in the phase out period for the two biggest manufacturers – Tesla and GM – it’s no surprise that many Democrats in Congress are clamoring to lift the cap and keep the subsidies flowing. Unfortunately, several Republicans are joining the effort, creating unfortunate bipartisan support for a piecemeal version of the crackpot Green New Deal they have been rightly mocking and ridiculing. The so-called Drive America Forward Act would triple the existing cap on subsidies of 200,000 per manufacturer – massively expanding a program that was always supposed to be temporary and was originally premised on the national security rationale that it would lessen dependence on foreign oil – a now comically anachronistic concern when the United States has become a leading oil exporter. Moreover, while the Green New Deal is a socialist income leveling exercise in the guise of environmental policy, electric vehicle subsidies use environmental delusion as a cover for a wealth transfer from poor and middle income Americans to the rich who buy electric hobby cars as their third or fourth vehicle. Voters agree – with a recent poll showing 67 percent do not think their taxes dollars should help pay for electric vehicle subsidies. The Pacific Research Institute looked at IRS data and found that more than half of the electric car buyers claiming the credit make more than $200,000 per year and nearly 80 percent make more than $100,000. Just 1 percent make $50,000 or less. There is also a geographic dimension to the wealth redistribution. The most recent industry data shows that nearly half of all electric vehicles sold in the United States are sold in California, which has its own lavish subsidies at the state level. A September 2018 NERA Economic Consulting study looked at the economic impact of eliminating the cap and found that the costs outweigh the benefits. The study finds total household income falling as a consequence of lifting the cap by $7 billion in 2020 and $12 billion in 2035, which is about $50 to $70 per household in lost income every year. That’s a cost of over $50 every year to middle-income Americans to pay for subsidies for rich people in California. Orrin Hatch, the original sponsor of the bill, explained the logic behind the cap in 2007: “I want to emphasize that like the tax credits available under current law for hybrid electric vehicles, the tax incentives in the FREEDOM Act are temporary. They are needed in order to help these products over the initial stage of production, when they are quite a bit more expensive than older technology vehicles, to the mass production stage, where economies of scale will drive costs down and the credits will no longer be necessary.” At the time, big subsidies for electric vehicles were justified based on the theory that they were needed to lessen American dependence on foreign oil. A decade later, America is the largest oil and gas producer in the world and electric vehicles are a mature enough technology that they should be left to succeed or fail on the preference of consumers, not politicians. Ironically, it is now electric vehicles that are vulnerable to strategic supply disruptions because they require rare earth minerals for their motors and batteries –the production of which is overwhelmingly controlled by China. Such resources also present moral issues, with the cobalt used for batteries sourced in part from Congo mines worked by children in hazardous conditions. Meanwhile, gasoline vehicles have become vastly more environmentally friendly and fuel efficient. In fact, a study last year from the Manhattan Institute found that widespread deployment of electric vehicles would only reduce greenhouse gas emissions by 1 percent – and would increaseemissions of SO2, NOx, and particulate matter. The bottom line: efforts to raise the cap are a cash grab that will force taxpayers to subsidize wealthy Californians for no presently valid reason. Congress should let the subsidy phase out as scheduled. Phil Kerpen a leading free-market policy analyst and advocate in Washington. Prior to joining American Commitment, Kerpen was the principal policy and legislative strategist at Americans for Prosperity for over five years. Kerpen is also a nationally syndicated columnist, chairman of the Internet Freedom Coalition, and author of the 2011 book Democracy Denied.
Phil Kerpen: New strategy offers Trump a much bigger NAFTA win
In politics and public policy, sometimes a modest victory is actually a massive missed opportunity. President Trump is at risk of suffering just that kind of setback with the impending completion of negotiations on the new NAFTA – if he fails to heed the brilliant strategic advice of Senators Ted Cruz, Cory Gardner, and Steve Daines. To date, NAFTA talks have revolved around important but obscure issues like investor-state dispute settlement, local content, and a potential sunset or review clause – hardly the typically visionary stuff of our chief executive. These three senators have suggested a much bigger idea: a competitiveness chapter designed to codify and make permanent key Trump achievements on permit streamlining, regulatory reform, and workforce development that, once made part of a trade agreement, could be submitted for an automatic up or down Senate vote under fast-track Trade Promotion Authority without the possibility of a Democratic filibuster. The strategy is backed by dozens of conservative leaders. The package would strengthen the core objectives of NAFTA renegotiation by assuring a more stable, business-friendly regulatory environment, making it more attractive for companies to invest and create jobs in the United States. It would also permanently fix the regulatory process, cementing a Trump legacy of pro-growth regulatory reform and making another Obama-like regulatory assault on the U.S. economy nearly impossible. Mexico has added a placeholder chapter to the agreement for these provisions, and even if they or Canada objected they could simply note their exception and allow the president to still include these provisions in the enabling legislation submitted to Congress. The most significant part of the Cruz-Gardner-Daines proposal is a bill called the Regulations from the Executive in Need of Scrutiny (REINS) Act, which would require all future costly regulations to be submitted to Congress for approval before they could take effect. President Trump is a longtime supporter of this concept, telling me in response to a 2015 survey: “I will sign the REINS Act should it reach my desk as President and more importantly I will work hard to get it passed. The monstrosity that is the Federal Government with its pages and pages of rules and regulations has been a disaster for the American economy and job growth. The REINS Act is one major step toward getting our government under control.” Under President Obama, the REINS Act was needed to stop an onslaught of economically crippling regulations from the alphabet soup of federal agencies. Now that President Trump has stopped and largely reversed that onslaught, it would serve a different but no less important purpose: making those deregulatory accomplishments permanent, locking them in as a legacy into the next administration. Without the REINS Act, President Trump’s highly successful pro-growth deregulatory efforts could prove ephemeral, reversed by the next Democratic administration that could put all the job-crushing Obama regulations back in place – and worse. Along with other critical reforms in the Cruz-Gardner-Daines proposal including permit streamlining for major public and private infrastructure, resource extraction, and manufacturing projects as well as provisions to rationalize federal workforce development policies, the competitiveness chapter offers a big, visionary win worthy of President Trump. By including the REINS Act, it would also end the shameful decades-long practice of Congress passing broad, vague laws and claiming credit for good intentions while leaving all the real economic decision-making to unaccountable, unelected bureaucrats. That would be a signature legislative accomplishment for members of Congress that they can be proud of and campaign on. With the potential for such a massive, historic victory within his grasp, it would be a shame if President Trump settled for a new NAFTA that simply rearranged the typical subject matter of trade agreements. ••• Phil Kerpen, a leading free-market policy analyst and advocate in Washington, leads American Commitment. Prior to joining American Commitment, Kerpen was the principal policy and legislative strategist at Americans for Prosperity for over five years.
Phil Kerpen: Why Congress should pass tax reform before Christmas
Unemployment is low, stocks are booming, and business confidence is soaring to record highs. Yet wages for too many Americans are still barely increasing after eight long, flat years of the Obama presidency. The American people deserve a raise, and the Tax Cuts and Jobs Act will deliver one. Middle class families would see a significant boost in take-home pay if the proposed tax changes take effect in 2018. Under the Senate version, the standard deduction jumps from $13,000 to $24,000 for a married couple and from $6,500 to $12,000 for a single filer. Above the much more generous deduction amount, the rate would be cut to 12 percent all the way up to $77,400 for married couples and $38,700 for singles. The rest of the rates would also be cut, providing tax cuts at every income level – while the share of all federal income taxes paid by millionaires would tick up from 19.2 percent of all revenues to 19.7 percent. The bill doubles the child credit to $2,000 per child and makes it nearly universal. That has been a top priority of Senators Mike Lee of Utah and Marco Rubio of Florida, who argue that making the tax code less punitive toward investment requires recognizing the enormous capital required to raise children. Perhaps more significant than these direct tax cuts is the impact of the bill’s business tax cuts on wage growth. The U.S. is presently uncompetitive internationally, with the highest corporate tax rate in the world and a perverse system that penalizes companies for bringing home the profits of their foreign subsidiaries. An analysis by Council of Economic Advisers Chairman Kevin Hassett finds that fixing these problems will raise household incomes $4,000 to $9,000, with around two-thirds of the benefits of business tax reform flowing to labor. While other economists disagree about how much wages will jump if the business tax system is fixed, there is overwhelming empirical and theoretical evidence that wages will rise considerably. While a lot of attention has focused on the Senate bill fully repealing the deduction for state and local taxes (the House version retained it for property taxes up to $10,000 per year), the vast majority of taxpayers are unaffected by the provision because they either already claim the standard deduction or will at its new much higher levels. For taxpayers who still itemize, the repeal of the alternative minimum tax largely offsets the loss of the state and local deduction, and the other features of the bill likely put them ahead overall. For most taxpayers, ending the deduction is an implicit tax cut, because it will stop high tax states from exporting their tax burden to the rest of us. A recent example is in New Jersey, where State Senate President Steve Sweeney reacted to the election of a Democratic governor by saying the state’s first order of business would be to enact a millionaires tax – only to backtrack, explaining that if federal tax reform passes he would reconsider because New Jersey millionaires would not be able to write off the new tax on their federal returns. The Senate also added two new crown jewels to the House version: repeal of the Obamacare individual mandate tax and oil drilling in the ANWR area of Alaska. The individual mandate is the corrupt, hated, beating heart of Obamacare – the idea that people should be required to buy overpriced insurance products they don’t want or pay a penalty tax. Obama himself campaigned against it in 2008, saying a mandate would mean “people are being fined for not having purchased healthcare but choose to accept the fine because they still can’t afford it even with the subsidies. They are then worse off. They then have no health care and are paying a fine above and beyond that.” IRS data show that 79 percent of taxpayers who pay the mandate tax make less than $50,000 and 37 percent make less than $25,000. The best argument mandate supporters can muster is that if people are not taxed for opting out of Obamacare, more people will opt out. But it’s hard to see how people who might sign up solely to avoid the mandate tax are hurt by having the option to say no. And removing the mandate will set the stage for more sweeping health care changes to lower premiums and give Americans more health care choices next year. The ANWR provision would be a big boost to American energy production and would help realize a vision of an America that is energy dominant. It would also represent a victory over a multi-decade spin campaign in which the environmental left turned a nearly desolate tundra into the key symbolic battleground for stopping energy development in the name of environmentalism. It is not often that a piece of legislation holds the promise of slashing the taxes on families, growing their wages, freeing them from a burdensome health care regime, and expanding American energy dominance. It’s time to stop handwringing about its minor flaws, see the big picture, and put this bill on President Trump’s desk in time to make this a very merry Christmas for American families. ••• Phil Kerpen, a leading free-market policy analyst and advocate in Washington, leads American Commitment. Prior to joining American Commitment, Kerpen was the principal policy and legislative strategist at Americans for Prosperity for over five years.
Phil Kerpen: Stop Obama’s Clean Power grab
In President Obama’s first big speech to Congress, just a month after he took office, he said: “I ask this Congress to send me legislation that places a market-based cap on carbon.” They didn’t. Indeed, largely because of Obama’s own words on the campaign trail, it became clear that under his plan for a cap-and-trade system, “electricity rates would necessarily skyrocket” and that if “somebody wants to build a coal-powered plant, they can. It’s just that it will bankrupt them.” These facts became well known and contributed directly to the smashing defeat of his proposed cap-and-trade legislation during his first term, when it barely squeaked the through the House and was dead-on-arrival in the Senate even though Nancy Pelosi and Harry Reid were running the places. Yet this week, the president had his EPA issue the Clean Power Grab, a 1,560-page rule coercing states to adopt precisely the cap-and-trade policies he previously admitted required legislation from Congress. They did it with wildly creative lawyering to twist the Clean Air Act of 1970 into a global warming law. Longtime liberal Congressman John Dingell said: “This is not what was intended by the Congress and by those of who wrote that legislation.… So we are beginning to look at a wonderfully complex world which has the potential for shutting down or slowing down virtually all industry and all economic activity and growth.” The failed 2009 cap-and-trade bill called for a 20 percent reduction in greenhouse gas emissions over 11 years and 42 percent reduction over 21 years. The Clean Power Grab splits the difference, requiring a 32 percent reduction over 15 years. Otherwise it is nearly identical. The administration is simply acting as if the law they wanted passed. If they succeed, it would mean steeply higher electric bills and major manufacturing job losses for what, according to conventional climate models, would avert less than 0.02 degrees Celsius of global warming by the year 2100. Can they get away with it? There will certainly be litigation, and President Obama’s own Harvard law professor, liberal legal giant Laurence Tribe, has said of the Clean Power Grab: “Burning the Constitution should not become part of our national energy policy.” But the recent history of a related rule, and the insidious structure of the Clean Power Grab, suggest that President Obama and the EPA may succeed even if they ultimately lose in court. In June, the Supreme Court caught the EPA failing to even consider billions of dollars in costs, and struck down another expensive anti-coal rule. The EPA’s response was a smug press release saying the illegal rule had already accomplished its purpose: “EPA is disappointed that the Court did not uphold the rule, but this rule was issued more than three years ago, investments have been made and most plants are already well on their way to compliance.” In those three years , the value of the country’s three largest publicly traded coal companies was crushed from $25 billion to just $1 billion. That’s 96 percent of the wealth of a vital American industry already wiped out. The Clean Power Grab similarly seeks to lock itself in permanently, even if eventually found illegal, by coercing states to do most of the dirty work of enacting draconian caps on fossil fuel use into state law. Those laws would continue in effect after the EPA rule is struck down, and would create permanent rent-seeking corporate cronies who benefit from emissions trading and renewables mandates that would make the laws almost impossible to repeal. All state leaders should protect their citizens from higher electricity prices and job losses by rejecting the Obama administration’s call to submit a state plan. And they should join the effort to defeat the Clean Power Grab in court, in Congress, and at the ballot box. Phil Kerpen is president of American Commitment and a free-market policy analyst.
