The Fossilization Of The Tax Code

In its 2016 census, the Solar Foundation found that the number of jobs in the solar industry alone grew significantly in 2015
In its 2016 census, the Solar Foundation found that the number of jobs in the solar industry alone grew significantly in 2015-2016, particularly in “Trump Country”.

Here is a story relevant to the tax reform bill being hammered out in Congress. It will take a minute, so please stick with me.

Back in 1992 when Bill Clinton was running for president, his staff searched for a theme that would grab the attention of the American people. The options were boiled down to three. The first was “Change versus more of the same.” The second was “Don’t Forget Health Care.”

Clinton’s strategist, James Carville, hung the third option on the wall as a constant reminder for the campaign staff. It said simply, “The economy, stupid.” In one form or another, that phrase has been part of every presidential campaign since.

A political commitment to a healthy economy is a no-brainer, of course. But the commitment gets real at the personal level. It means jobs — decent jobs that provide fair wages, upward mobility and financial security. If we had a steady-state economy, people wouldn’t worry so much. But our economy is about as far as it can be from steady-state. It is disrupted more than ever before, and more rapidly than ever before, by new technologies and factors we do not control, from the weather to oil prices.

Job security today is not likely to come from working for the same company or using the same skill set for 30 or 40 years. Security requires agility – the ability to see which industries are blooming and which are fading. It requires that we accept the need for lifelong education and retraining.

“By 2050, the idea of a ‘job for life’, but even the idea of ‘a profession for life’ might seem antediluvian,” notes a recent article in the journal Nature. “It is particularly important to identify as early as possible the potential winners and losers from new technologies.” Where the author goes wrong is his timing. The idea of a job for life already is obsolete.

Government must be forward-looking, too. The people we elect to shape our tax system and government budgets must invest our money well. The tax code influences the economy by rewarding some activities and penalizing others. The yearly federal budget process decides how the government allocates the trillions of dollars it collects from us each year ($3 trillion last year, about 47 percent from individual income taxes, 34 percent from payroll taxes, 9 percent from corporations and the rest from a variety of other taxes).

To keep up with change these days, Congress must be as agile as individual workers. Unfortunately, that is not the case. Congress used to have an Office of Technology Assessment to keep abreast of scientific and technical issues, but the office was shut down in 1995. Today, our elected leaders seem more comfortable standing still.

“Our politics and our institutions are locked in past models that are increasing unfit for purpose,” writes Ian Goldin, a professor of globalization and development at the University of Oxford. “Over the next 20 years, up to half of US jobs, one-third of jobs in the United Kingdom and the European Union and two-thirds of jobs in China and Mexico may be replaced by computers and robotics.”

Another area of rapid change is the energy sector, where a technology revolution already is underway. The global and national economies are both moving to low- and no-carbon energy resources, particularly renewable energy where fuel is free, supplies never run out and there is no air pollution.

Coal, the dirtiest of fossil fuels, can no longer generate electricity as inexpensively as solar and wind power. Natural gas, often considered a “transition fuel” as the economy shifts to clean energy, has its own environmental drawbacks including polluted wastewater and leaks of methane, one of the most potent gases responsible for climate change.

The days are numbered, too, for vehicles fueled by oil products. General Motors plans to produce only electric vehicles in the not-too-distant future. Forbes, among others, says we are headed to a future in which 65% to 75% of all the vehicles sold in the United States will be electric. An oil-industry consultant, David Yager, reports “the current discussion about the future of oil is how soon it will be before petroleum becomes a sunset industry. If it isn’t already.”

In its 2017 Energy Outlook, British Petroleum observes:

The global energy landscape is changing...More than ever, our industry needs to adapt to meet those changing energy needs…Rapid improvements in the competitiveness of renewable energy mean that increases in renewables, together with nuclear and hydro energy, provide around half of the increase in global energy out to 2035.

The American people support this revolution. As President Trump prepared to take office, 75 percent of his supporters said they wanted the country to accelerate the deployment and use of clean energy – solar, wind, and energy efficiency.

What has all this to do with tax reform? President Trump has chosen to move the nation backward rather than forward. His plan is to make the United States the world’s leading producer of coal, oil and natural gas. The two tax bills Congress is consolidating right now support this idea. Analyses of the individual House and Senate tax bills indicate that congressional tax reform will be, as the Los Angeles Times puts it, “clearly allied with the Trump administration’s goal to shift American energy development back to black fuels and reverse Obama-era programs to encourage cleaner technologies to generate electricity and move people and goods.”

In regard to jobs, the tax loopholes and subsidies the House and Senate tax bills would retain for fossil fuels go against the energy economy’s tide. We know from the U.S. Department of Energy that the energy efficiency sector alone employs 2.2 million Americans, while 1.1 million Americans work in the traditional coal, oil and gas industries. Nearly 260,000 Americans work on alternative fuel vehicles, 374,000 people work in solar energy and more than 100,000 people work in the wind industry.

Ironically, most of these jobs are showing up in Trump Country. In Oklahoma, Nebraska and Alaska, for example, solar jobs grew 100 percent between 2015 and 2016, according to the Solar Foundation. Of the 10 states where solar jobs grew fastest, eight voted for Trump in the presidential election. This tide will not ebb. Employment projections issued in October by the U.S. Bureau of Labor Statistics indicate that solar and wind energy jobs will grow twice as fast as employment in any other occupation over the next 10 years.

Keeping America and its workers stuck in the old energy economy is a terrible use of the tax code and tax dollars. The best public investments would help our workers and our economy make the smoothest possible transition to clean energy. President Trump’s desire to lead the world in energy has merit, but we should lead in renewable energy technologies, not fossil fuels. That’s where global markets are moving today and where we in the United States would find the greatest opportunity for jobs that make our economy and our lives more secure.

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