Regardless of how you feel about it, the United States tax system is a powerful instrument of social policy. The tax structure influences major & minor decisions by economic actors from the largest corporations down to individual families. So what environmental policy positions are reflected in the current tax code, and how can you exploit them in support of your values?
There’s been a lot of media attention paid recently to tax benefits received by the oil & gas industry. These are highly complex, but include depletion allowances that permit deduction of a fixed percentage of revenue, even if it exceeds actual cost, and the 100% credit against US tax for royalties paid to foreign governments for drilling rights which are truly expenses, not tax. These tax subsidies can also be seen as discouraging recycling & the development of alternative energy sources.
Numerous other tax provisions have negative effects on the environment. One example is the mortgage interest deduction that allows so many families to buy homes but increases suburban sprawl, gasoline consumption & the social cost of greener transportation alternatives. Another is the preferential treatment of heavier SUV’s in business use.
But if you’re trying to be green, what does the tax code offer you?
- Credits of 30% for Solar water heating & electric power, small wind systems & geothermal heat pumps. These systems are expensive, but a way to put your money where your values are and generate long-term energy savings.
- For this year, there are credits for 10% of the cost of insulation, doors, windows, furnaces, central A/C, etc. on your home, but with an aggregate limit of $500 and individual item limits. The great 30% home energy credits of 2009-2010 are gone, but if you have work to do on the house, use the tax credits too.
- There are credits of as much as $7,500 for full sized plug-in electric vehicles and $2,500 for “low-speed” neighborhood vehicles; there’s even a credit for 10% of the cost of converting a vehicle to electric. Unfortunately, the credits for alternative fuel vehicles (fuel-cell, lean-burn diesel, natural gas and hybrid) all expired at the end of 2010.
- Employers can exclude from your income “qualified transportation fringe benefits” including transit passes and even $20 a month for commuting by bicycle like almost 500,000 Americans do! (They can also exclude parking, but that’s not necessarily environmentally friendly – unless you carpool.) Ask your employer about this.
Taxes are usually a poor reason for taking a particular action on their own, but it’s always worth understanding all the implications of your alternatives, so you can minimize tax. When you can use the tax code to accomplish ends in concert with your values, so much the better.
There’s an EcoTax movement which seeks to shift the effects of the tax code toward environmental ends, and which has accomplished some significant changes in Canada, Europe & some states. And for the tax breaks you *don’t* like, or to encourage inclusion of policy initiatives more consistent with your values, call your Congressmember or Senator!