Chris Hayes of the Nation, who many of us know from his frequent appearances on Countdown, has uncovered a truly marvelous example of corporate perversion of the tax laws:
Thanks to an obscure tax provision, the United States government stands to pay out as much as $8 billion this year to the ten largest paper companies. And get this: even though the money comes from a transportation bill whose manifest intent was to reduce dependence on fossil fuel, paper mills are adding diesel fuel to a process that requires none in order to qualify for the tax credit. In other words, we are paying the industry–handsomely–to use more fossil fuel. “Which is,” as a Goldman Sachs report archly noted, the “opposite of what lawmakers likely had in mind when the tax credit was established.”
The massive tax subsidy has barely been reported in the press, but it’s caused a stir in the paper industry, which is struggling to stay profitable in the teeth of the recession. “Everybody’s talking about it,” paper industry analyst Brian McClay told me. “In the US and elsewhere in the world–in Canada and Brazil and Chile and Europe.”
Previously, the paper companies got all the energy they needed purely as a by product of the process by which they turned paper into wood. Adding diesel fuel to the process amounts to a gratuitious use of the fuel. As a hedge fund manager (of all things) quoted by Hayes, remarked, “You use the toilet every day, Imagine if you could start pouring a little gasoline into the bowl and get fifty cents a gallon every time you flushed.”
Congress clearly did not intend this. Stay tuned to see if it will be corrected, or whether the paper industry’s lobbyists will convince our representatives that this subsidy and waste is in the national interest. After all, Congress has still not seen its way clear to taxing that hedge fund manager at the same rate as his secretary.
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