GLOBAL WARMING AND THE FLAT TAX

It’s Friday and time for another shoot-the-shit topic. Shoot-the-shit topics are not always in keeping with this Blog’s genre. We recognize that you’ve had a long and hard week, so during our shoot-the-shits we provide you with interesting topics, the ability to make any unsupported statement, use uncensored profanity, insult anyone you wish or change the subject all together.

We’re getting very tired of a mainstream media that does nothing more than report on what our 2016 political candidates say on Twitter or Facebook. In last week’s shoot-the-shit we talked to you about NAFTA and what effects it’s had on regional trade since its implementation in 1994. If you’ve read it, you are now equipped to avoid getting snowed. This week we’d like to talk about global warming and the flat tax. I’ll start with Global Warming / Climate Change.

I’m not presenting a scientific treatise on the subject because it’s a toga party subject where “intellectuals” sit around speaking with multisyllabic words while their stretch limousines sit around waiting to pick them up. I’m going to present something very basic, a thought process. You can accept it, reject it or critique it, it’s simply a thought process.

The earth is a 4.6 billion year old ecosystem that has been undergoing climate change since its inception. We know this from our own Great Lakes, which were formed about 20,000 years ago when the earth’s climate warmed and the last glacial continental ice sheet retreated.  Let’s examine one more example, the Sahara Desert which began to be formed with the shrinkage of the Tethys – a giant ocean that was the origin of the modern Mediterranean, Black and Caspian Seas – a process that began 7 million – 4 million years ago. So, let’s agree that climate change has been occurring since the earth developed an atmosphere. All this occurred loooooong before man started using fossil fuels or driving Chevies. Any attempt to forecast doom and gloom from 100 years of data suggesting global warming and subsequent climate change is equivalent to forecasting your health with only seconds worth of medical data.

The earth’s surface is 75% water and as surface temperatures increase water evaporates and rises in the atmosphere, where it cools, condenses and becomes rain which has a cooling effect so it’s a self-regulating mechanism. There are other bio regulators at play also. However, as long as we have an atmosphere we are in reasonably good shape.

Our real challenge is the growing global population, which is currently at 7.3 billion people, all of who need clean breathable air, clean drinkable water, nutrition that provides a minimum of 2,000 to 3,000 calories per day and a source of unlimited and inexpensive power to drive global development.

Earlier I said the earth’s surface is 75% water so 25% is land. The total land surface area of Earth is about 57,308,738 square miles, of which about 33% is desert and about 24% is mountainous and generally considered uninhabitable. Subtracting this uninhabitable 57% (32,665,981 mi2) from the total land area leaves 24,642,757 square miles or 15.77 billion acres of habitable land. Of this habitable land approximately 50% is being used for farming and grazing. Our future challenge is how to increase food output from a limited land supply, how to reclaim uninhabitable land and how to manage the need for increase population density. Meeting all of these challenges, requires abundant and inexpensive energy sources and shutting down coal production and fossil fuel powered plants stands as a monument to stupidity. Driving up energy costs on a domestic and global scale to mitigate climate change and promote renewable sources is a colossal error in judgment. 

A comparison of how much land would be needed to produce 1,800 Megawatts of solar or wind energy compared to the amount of land needed to produce 1,800 Megawatts by a nuclear plant

Solar Power

  • Power Output: 1 Megawatt per 7.4 acres of photovoltaic solar panels.
  • Land Use: 13,320 acres (21 square miles)

Wind Power

  • Power Output: Above Average Wind Turbine Generates 2.5 Megawatts/turbine
  • Land Use: 108,000 acres (169 square miles)

Nuclear Power

  • Power Output: ~1,800 Megawatts ( 2 reactors)
  • Land Use: 1,100 acres1 (1.7 square miles)

Knowing that global population is increasing and that habitable land is limited, what power source and supporting technologies would you invest in?

Take the global warming and climate change argument with a very large grain of salt, but recognize that the pressing need is accommodating an increasing global population in a very limited supply of habitable and farmable land.

 

The Flat Tax

Let me dispel the notion that Presidents are responsible for economies. The only thing a President has direct control of is the regulatory environment via his or her agencies. They can also influence fiscal policy but it is Congress that levies taxes. Economies work where there is an abundance of liquidity (monetary policy) and where the markets are allowed to freely interact creating demand and supply. Economies are consumption driven through consumer demand and capital investments on the part of business.

The flat tax has the appeal of a glazed doughnut. It’s simple and intuitive, and from an economist’s view it makes sense. A flat tax would do away with all business and individual deductions; for example, the homeowner deduction would disappear. Because the deduction is a subsidy, home prices of existing and new homes would drop. But, a flat tax is pie in the sky and here’s why.

One of the most powerful tools government has to influence behavior is through tax law. For example, if government wants to see a 50 m.p.g. vehicle it offers the buyer a large tax credit and through tax law they incentivize individuals or businesses to move in a specific direction. This works in both ways for example smoking. Government wants you to stop smoking, so how do they do it? They keep increasing the price per pack by adding or increasing taxes. A flat tax at the federal or local level greatly limits a lawmaker’s ability to influence, one way or the other, individuals and businesses. This is something they’re not likely to be willing to give up.

There are thousands of law firms across the United States who’s primary business is tax law. They would be pushed out of business.

There are thousands of C.P.A. firms across America that look to tax season in order to make their annual revenue targets. They too would be pushed out of business.

Large publicly traded corporations have spent billions of dollars lobbying for sector specific tax credits or deductions. As a result, they have effective tax brackets lower than most individuals and in many cases paying $0 taxes and in several cases the ability to carry tax losses forward to other tax years. A flat tax would eliminate those deductions resulting in a much higher effective tax bracket for these companies. They’re not going to get behind a flat tax.

So if you’re a candidate for office pledging a flat tax, the media should be asking you how do you get a flat tax passed? Give Facebook and Twitter a break media and drill down on candidate positions.

Hope you’ve enjoyed our shoot-the-shit. Have a great weekend, be safe and spend quality time with your buds and family.

 

 

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