Morgan County businessman John Christensen is upset.
Christensen, who operates Mountain View Solar, says his industry is supposed to be getting a tax credit under a 2011 West Virginia law designed to encourage the use of alternative fuels.
The law does indeed list “electricity… from solar energy” as an alternative fuel that could be used to power alternative vehicles that qualify for the credits.
Christensen says, however, that solar has been shut out of the tax credit largess.
He’ll have to work that one out with the state, but the dispute raises a larger question: why would a state that has loads of coal and natural gas use taxpayer dollars to subsidize solar power in the first place?
The original legislation is filled with feel-good pap about how alternative fuel credits will reduce the dependence on foreign oil and improve air quality. The Associated Press reports the credits “cover 35 percent of the cost of an alternative fuel vehicle, up to $7,500 for cars and $25,000 for large trucks.”
The original bill had no fiscal note, meaning it was passed without regard to how much the tax giveaways would cost. But now that the price tag has become evident, the Tomblin administration wants to scale back the program.
The Governor wants the credit to apply only to natural gas powered vehicles. Evidently the aim is to incentivize that industry since West Virginia has huge supplies of natural gas.
The Associated Press quotes Deputy Revenue Secretary Mark Muchow estimating that eliminating all other alternative fuels from the credit program will save the state about $10 million a year.
But here is the larger question: why is the state in the tax credit business at all?
The simple answer by those who support the concept is that credits, which reduce the amount a taxpayer has to pay, will help attract new businesses and encourage existing businesses to expand.
West Virginia’s myriad tax credits are mostly bunched into four categories: economic opportunity, research and development, manufacturing and high-growth business investment. A state tax department review of those programs found that from 2003 to 2009 the state reduced companies’ taxes by $44 million through those four tax credit programs with a net creation of about 6,500 jobs.
True, it’s beneficial to have more people employed, but those jobs are being subsidized by taxpayers. Special credits mean revenue due the state goes uncollected, so the rest of the taxpayers have to bear more of the burden for the cost of government services.
Credits are efforts by public policy makers to micromanage the free market in ways that often produce questionable benefits. According to the Governor’s Commission on Fair Taxation 1999 report, credits “do not embody the values of neutrality and consistency” which are fundamental principles of taxation.
In short, why should the government pick winners and losers?
John Christensen is a true believer in the future of solar power, and he can make a compelling argument for helping his industry get off the ground.
Maybe he’ll be successful, and that would be wonderful. But why should the taxpayers be on the hook for his business, or any other for that matter?