Energy Fact of the Week: How Much Green for ‘Green Jobs’?

Pathetic simply pathetic. Yet another example of emotion and hope driving policy rather than fact and logic. In the face of facts that point out that "Green Jobs" are a total bust the Obama administration continues

to pursue a policy of wasting tax payer funds and driving long-term inflation by printing and spending money we do not have. These policies have to end if the U.S. and the western world is to experience a true economic recovery.

Energy Fact of the Week: How Much Green for ‘Green Jobs’?

By Steven F. Hayward

September 22, 2011, 9:49 am

•   

Even without the bankruptcy of Solyndra, the Washington Post noted that the Department of Energy’s entire $38 billion loan guarantee portfolio has generated a total of just 3,545 jobs—rather fewer than the 65,000 jobs the Obama administration projected the program would generate. That’s over $6 million per job. That’s a lot of ’70s-era Steve Austins running around powering the country. Even if the program worked as advertised, Dan Mitchell points out, it would come to about $600,000 per job generated, compared to an average capital cost of about $160,000 per job across the economy as a whole.

This might still not be unreasonable if these green energy jobs generated a lot of energy. In fact, overall electricity-sector investment generates fewer jobs than the average per dollar invested in the general economy. But it doesn’t appear that green energy programs produce jobs or energy in much quantity. A study by Hillard Huntington for Stanford University’s Energy Modeling Forum in 2009 looked at jobs created in different sectors of electricity production, and concluded that:

the advantages of increased jobs from renewable energy are vastly overstated at costs prevailing today … More importantly, strategies that subsidize these investments will be shifting the country’s scarce resources from sectors that would create more jobs (as well as economic value). This conclusion applies even for an economy in a deep recession and where policy wants to stimulate employment. Investments in roads, ground transportation and health care are likely to stimulate employment considerably more than green electric power generation. Policymakers and government agencies should look askance at the claimed additional job benefits from green energy.

Bottom line: “It will require a dramatic break-through in costs if renewable energy is to become a job generator.”

The Huntington study includes a very useful table that shows the final limitation of the green jobs mania. Although $1 million spent on “green” sources such as wind, solar, and biomass will generate slightly more jobs than $1 million spent on coal or natural-gas-fired electricity, the $1 million spent for coal or gas generates far more energy, making coal and gas a much more efficient investment. Figure 1 displays estimates of the number of jobs generated from $1 million in each electricity source, showing that by some estimates renewable sources produce more jobs per $1 million (the difference reflects the range of costs for renewables, which fluctuate wildly). Figure 2 shows the amount of electricity output from $1 million invested in each form. While wind and biomass stack up well with natural gas, coal is still the cheapest, and solar performs very poorly. (Caveat: these figures are based on 2006 prices. The fall in natural gas prices since that time will probably yield a different result today, placing it closer to coal.)

Energy Fact of the Week: How Much Green for ‘Green Jobs’?

Warren Buffett’s Tax Story Is Bogus

Great analysis by the Cato Institute on what are the actual tax rates payed by each income category. As is usually the case the facts do not hold any passing resemblance to the political talking points and assumed truths of the left. What I find most discouraging about this debate of taxes is that this country has lost the will to face facts and make informed decisions. We are rapidly becoming a nation where emotion plays a larger role in policy than fact. Sad and a true sign of cultural decline.

Warren Buffett’s Tax Story Is Bogus

Warren Buffett’s Tax Story Is Bogus

Print

For years, Warren Buffett has been claiming that his secretary pays a higher tax rate than he does. Recently, President Obama has taken that claim and run with it. I don’t know Mr. Buffett’s particular tax situation, but I do know that his claim as a general matter is bogus.

Let’s look at some numbers. The first chart shows IRS data for income tax rates by income group for 2009. These are average effective tax rates, calculated as income taxes paid divided by adjusted gross income (AGI). The chart shows that taxpayers with incomes above $500,000 had tax rates averaging about 25 percent. Middle-income taxpayers had tax rates of half of that or less. A few years ago, Buffett claimed that his secretary earned $60,000 and paid a 30 percent tax rate. But looking just at income taxes, that seems way off. (Note that this data doesn’t include the “refundable” portion of tax credits, which wipes out taxes for many people at the bottom end).

Perhaps Buffett was referring to the fact that his secretary pays a heavy load of payroll taxes in addition to income taxes. But when you look at data which includes all federal taxes, the system is still highly graduated with much higher rates at the top end.

Chart 2 shows CBO data for 2007 on average effective tax rates, including essentially all federal taxes—individual income, corporate income, payroll, and excise. Buffett’s secretary would fit into the fourth group in the chart, where the average tax rate was 17.4 percent. So if she is really paying 30 percent, then Buffett needs to show her some of his tax-reduction tricks. Note in the chart that Buffett’s peers in the top 1 percent paid an average rate of 29.5 percent, which is double the rate paid by middle-income taxpayers.

In 2007, Buffett said that he paid a 17.7 percent tax rate. Alan Reynolds notes that Buffett earns large amounts of capital gains, which are taxed at a maximum federal rate of 15 percent. People in the top income groups do report a lot of capital gains, which reduces their overall effective tax rate. However, capital gains are included in chart 1, above, and you can see that the top income groups still pay much higher tax rates than others on average. One reason is that a large amount of income at the top is small business income, which is hit by ordinary income tax rates of up to 35 percent.

You have to go to the extreme top end of the income spectrum in order for capital gains realizations to really push down overall effective tax rates. The IRS publishes data for the 400 highest-income taxpayers. For these taxpayers, the average effective income tax rate in 2008 was 18.1 percent.

Since the beginning of the income tax, we have nearly always had special treatment of capital gains for some very good reasons, as I discuss here. I point out that virtually all high-income nations recognize that capital gains are different and that special rules are needed. A number of OECD nations have long-term capital gains tax rates of zero, including New Zealand and the Netherlands.

Another important aspect to this debate regards the link between capital gains and dynamism in the economy and dynamism in tax payments. The political left makes it seem as if there were a permanent aristocracy at the top end of the income spectrum in America. However, IRS data show the exact opposite—the top 400 are a highly dynamic group. Notice first in IRS Table 1 that 57 percent of AGI for these taxpayers is capital gains. That is a key reason why the people in this group are constantly changing—large capital gains realizations are occasional events that rocket people to the top of the AGI heap. One example is when an entrepreneur sells her successful and longstanding business and retires.

The last table in the IRS document reveals the dynamism. The IRS traced the identities of all taxpayers who showed up in the top 400 anytime between 1992 and 2008. The IRS found that there were a huge 3,672 different taxpayers who appeared during that timeframe. Of these 3,672, fully 73 percent only appeared once in the top 400! And 85 percent appeared only once or twice.

So at the top end of our capitalist system is a continual generation of new wealth and new wealthy people, and that dynamism reflects the still-energetic and free-wheeling nature of our economy.