Thursday, August 6, 2009

Cap And Tax Redux

There are so many terrible ideas coming out of Congress that friends of mine are suffering from near protest fatigue. Ironicly, as I write this, democrat operative Bob Shrumm is repeating the Pelosi pie-in-the-sky wishful though du jour, that the protesters are hired hacks. Well, my CPA is no hired hack. This is a bookish guy who quietly runs an admirable business with his wife, also a CPA, in a small office in South St. Louis County. He is fed up enough that he penned this analysis and invited me to share it. Enjoy:


On June 26, 2009 the U.S. House of Representatives passed the so-called Cap and Trade Bill. The Bill is over 1400 pages long (including 300 pages added early in the morning on the day of the vote in a cynical political move designed to railroad the bill through without adequate time for study or debate). Cap and Trade is a cute marketing term. This Bill covers much, much more than just the trading of carbon permits to reduce emissions. The Bill even contains a section about light bulbs. The Table of Contents for the Bill is 16 pages long!

With all the news focusing on health care legislation, it is easy to forget that this Bill has already passed the House and has been sent on to the U.S. Senate. It is expected that the Senate will debate and vote on the Bill this fall. It must be defeated! Senators will be in their home states during the month of August. They need to hear from the voters. They need to hear from you!!

Cap and trade involves setting a total cap on national greenhouse gas emissions and establishing a market for a finite number of allowances to emit greenhouse gases up to the total amount of the cap, which would be lowered gradually over time.

This Bill will be very harmful to the Unites States.

First: The Bill sets the ambitious target of reducing total U.S. greenhouse gas emissions by 83% below 2005 levels by the year 2050! In effect, the U.S. will need to reduce emissions to a level last experienced in 1910 when the U.S. had a population of 92 million (compared to the forecast population of 420 million in 2050). As this level of reduction is simply not possible, the Bill includes a large number of “offsets” which are treated as part of the reduction. Offsets essentially consist of planting more trees here in the U.S. and in developing nations. Carbon emitters (e.g. coal burning companies such as electric utilities) will pay developing nations to increase reforestation efforts. This is essentially a huge foreign aid program.

Congress can mandate emissions reductions for the United States but they cannot mandate them for the rest of the world. China and India, two of the world’s largest emitters of greenhouse gases, do not plan to reduce their emissions. Our adoption of these reductions will put us at a disadvantage to China and India and will not result in worldwide reductions of these emissions.

Second: If you own a home or other building, you need to be aware of Title II of the Bill which REQUIRES:

New buildings must be 30% more energy efficient than current building code standards effective immediately upon signing of the Bill. New buildings must be 50% more energy efficient by 1/1/2014 (residential) and 1/1/2015 (commercial). New buildings must become 5% more energy efficient every 3 years thereafter until they are 75% more efficient than current standards.

Existing buildings will be subject to inspection by the authorities to make certain that they meet the applicable energy efficiency standards: (1) When they are renovated, (2) when they are sold, or (3) when the person responsible for the utility bill is changed.

The Bill creates a big new Federal entitlement program which provides funds to pay up to 50% of the cost up to $12,200 to assist residential building owners and funds to pay up to 50% of the cost to assist non residential building owners to increase the energy efficiency of their homes/ buildings to prescribed levels. As expensive as this program will be to taxpayers, it still leaves the homeowner/building owner holding the bag for the other 50%.

As you can see, this Bill has a direct impact on you if you are a property owner. It will increase your costs, reduce your return or profit and reduce your freedom as a property owner to do with your property as you wish.

Third: The Bill is very harmful to the economy. The Heritage Foundation has estimated that the Bill will cause unemployment to increase by 2 million in 2012 and further increase to 2.5 million in 2035 and will cause GDP loss of $9.4 trillion by 2035.

Fourth: It will not even have a significant impact on global warming. Climatologist Chip Knappenberger of New Hope Environmental Services calculates that the Bill will reduce Earth’s temperature by .1 to .2 degrees Celsius by 2100.

This Bill needs to be defeated in the United States Senate. That can only be done if everyone contacts their Senator. If a Senator opposes the Bill, thank him or her. If a Senator is undecided make certain they know you oppose the Bill. If a Senator favors the Bill, make sure they know you don’t favor it, that you vote and that this Bill is important enough that you will vote against them in the next election.

The most effective means of contact is obviously person-to-person. Many Senators will be holding town meetings during the recess. If you can attend one, do so and speak up. If you can’t you should write an old-fashioned snail mail letter. The address is:

Office of Senator (Name)

United States Senate

Washington, D.C. 20510

Each Senator has local offices also. You can find your Senators’ local offices in the Government pages in your local phone book. Alternatively, you can contact your Senator, by e-mail at You can access the Senate Web Site and find your Senator’s Washington office phone # and call that office. You can also call the Capitol switchboard at (202) 224-3121 and they will put you through to your Senator’s office or you can also call their local office.

Cap and Trade can be stopped if we act!!

Prepared by Brent P. Stewart, CPA

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