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Monday, August 20, 2007

Global warming and our tax laws

H.R. 2776 passed by the House on 8/4/07 would provide a variety of incentives for alternative energy, paid for with reduced tax breaks for the oil industry. It also calls for a "carbon audit of the tax code."

Treasury would work with the National Academy of Sciences to conduct a "comprehensive" review of the tax law to "identify the types of and specific tax provisions that have the largest effects on carbon and other greenhouse gas emissions and to estimate the magnitude of those effects." They would have 2 years to complete the report.

Should this provision become law or someone decides to do such a report anyway, what might they find? Here are some possibilities:

1. Allowance of mileage for business travel. Almost all of this is likely done in vehicles that produce carbon emissions. Perhaps deductions should only be allowed for travel in vehicles that use alternative energy sources that produce little or no carbon emissions. Or perhaps travel deductions should be reduced by a specified percentage if done in vehicles that emit CO2.

2. Expenses of air travel. This produces lots of CO2 and nitrous oxide. These expenses could be disallowed or only partially allowed so the tax law doesn't encourage air travel.

3. Favorable provisions for the oil industry such as percentage depletion. These could be eliminated to reduce GHG emissions.

And there are certainly many more.

What do you think?

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