Thursday, May 20, 2010

Oh No MoCo...Again

Watch Montgomery County Councilman George Leventhal insult constituents who oppose the misguided county carbon tax he favors then pat himself on the back for his ingenuity.

Montgomery’s carbon tax would put a $5 levy on each ton of carbon dioxide any company produces over 1 million tons. The tax would affect only one company, Mirant, which operates a coal-fired plant in Dickerson, MD. Supporters of the tax say the county would reap $15 million from the tax.

Remember businesses don’t pay taxes. They pass the cost of taxes on to consumers, in this case the utilities, which purchase the power from Mirant and the Maryland ratepayers to whom the utilities sell that power. In essence, Montgomery’s carbon tax is a regulatory tax foisted upon all Maryland utility customers.

Furthermore, it’s not the most economically sound course to tax a coal-fired power plant in Maryland, a state which generates 60% of it’s energy above the national average from coal.

Environmentalists will naturally counter that the externality of carbon dioxide emissions, which they allege drives global warming, is far more costly than the proposed tax. However, that presumption rests on the fallacy that reduced carbon dioxide emissions equal lower temperatures. They don’t, which is why environmentalists couch their arguments in terms of reduced carbon dioxide levels not temperature increase averted. Case in point, the Waxman-Markey the federal cap and trade bill passed by the House would surely reduce carbon emissions (while increasing energy bills and unemployment) but result in a meaningless one nine-hundredth of a degree change in average global temperature by 2050.

Millionaires are fleeing, County Executive Ike Leggett wants to raise energy taxes on business that create jobs, council members side with public sector unions against solutions to budget crises the unions caused, and now Leventhal insults citizens who show the temerity to question the efficacy of a dubious tax.

Seriously, what’s the matter with Montgomery County?


Bruce said...

"Remember businesses don't pay taxes."

A strong competitor for the least well-founded claim ever made on this blog, within a strong field.

When a transaction is taxed, all parties to the transaction bear the burden of the tax. The relative blunt is borne according to the price/supply elasticity of each. When businesses are taxed, both businesses and consumers are hurt; consumers will put up with some price increases and not others, and businesses will put up with some lost sales/profits and not others without raising prices.

Essentially a tax imposes three burdens: a depression of price efficiency for the buyer, a depression of net profit for the owner and a loss of utility for each from deadweight loss of lost trade.

What's ironic is that it would strengthen your argument to note that both businesses AND consumers eat this tax and businesses themselves ARE consumers as well (per Say's Law.

streiff said...

sorry, this is just economic ignorance on one level and an inability to read your own post (in this case the last sentence of your second paragraph) and comprehend it on another.

Business may collect taxes but they don't pay taxes. Take a sales tax, for instance, the consumer pays the tax on the sale. The business collects and remits it to the state. The business does not pay the tax.

Businesses simply build taxes into their pricing structure. If you've ever worked in a business, or taken an accounting course. you know this.

To claim that a tax necessarily imposes a depression of net profit on a business is just nonsense unless you are assuming a situation where you are forbidden to raise prices (like rent controlled apartments) or where significant numbers of customers can cross state lines and by the product cheaper. It would be accurate to say that it reduces the percent profit of the business but not the net profit.

Mark Newgent said...

Bruce, you also ingore the fact that that the tax will in no way fulfill it's intented purpose--restraining global warming.