Saturday, November 1, 2008

The Gasoline and Electricity Tax Increase Will Offset Obama's Tax Credit

My thinking is that what will propose a global warming bill with large increases in the gasoline tax and electricity. (Personally, I favor a higher gasoline tax to cut imports but certainly do not favor a higher tax on electricity.) (See interview with Iowa Public Television. )

I expect that this green tax will equal the $500/$1,000 tax credit for most individuals.

The biggest problem with Obama's proposal is that raising the tax on electricity will be a job killer. Electricity costs are an important part of manufacturing costs. It would make U.S. products less competitive with products in other countries. And, if it was based on greenhouse gases emitted, the states which have coal plants would suffer enormously.

My own thinking is that while there may be somethng to it, global warming could be the biggest hoax ever perpetrated. I think Obama's assertions in the interview that global warming is causing droughts or heat waves is laughable. It has been cold this October here. There was a snowstorm in London, the first in 86 years in October. There was a devastating freeze in China last winter creating havoc and devastation. Reportedly, there has been no warming since 1998.

Now I understand the need for a gasoline tax. You can't keep on paying to import 17 million barrels a day. Whether its $40 a barrel which equals 680 million dollars a day or $100 a barrel which equals $1.7 billion dollars a day, we can't do it.

But the electricity tax is another matter. That will devastate the economy.

Redistribution in New Jersey

We have had two forms of redistribution in New Jersey. One program takes state dollars and pours that money into urban school districts. Those districts now spend 50% more than suburban districts. The other is redistribution in the form of a homestead rebate. The rebate is currently 20% of property taxes up to $10,000 with the maximum rebate being $2,000.

The redistribution in the form of educational funding has massively raised property taxes in suburban areas. Those districts receive little funding from the state because all the money goes to the urban districts. The urban districts are as bad as they were before this funding increase started twenty years ago.

The redistribution in the form of the homestead rebate was cut back this year. Taxpayers with income between 150,000 and $250,000 did not receive a rebate of 10% of their property taxes as they last year. Those with New Jersey gross income above $100,000 received 10% of their property taxes back, down from 15% in the prior year. I think the New Jersey experience is relevant to the redistribution issue.