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Archive for October, 2013

The following blog post is  from Cause of Action, who has been involved in a lawsuit against Bloom Energy on behalf of John Nichols, a concerned local resident, and Fuel Cell Corp., a competitor of Bloom Energy from Connecticut. So far the judge who heard the case has ruled against John, but has never issued a ruling on the Fuel Cell Inc. issue. One wonders: How long can a judge go without issuing a ruling on a case he/she has heard?

Last month, Delmarva Power’s (Delmarva) Delaware utility customers learned that the “surcharge” they must pay each month to subsidize Bloom Energy, Inc.’s (Bloom) ongoing fuel cell project was increasing from an average 67 cents-per-month to $4.37 in November alone.

This “surcharge” is the result of a crony deal between Governor Jack Markell, the Delaware Public Service Commission (DPSC), and Delmarva to modify the Delaware Renewable Energy Portfolio Standards Act (REPSA), picking the pockets of Delmarva ratepayers and delivering millions of their dollars straight to Bloom.

Bloom’s sweetheart deal came down this way.  In October, 2011, Delmarva received approval from the DPSC to surcharge ratepayers’ electric bills and subsidize two generating stations and a fuel-cell factory in Newark, run by Bloom. Bloom, a California company, said that it would use Delmarva’s customers’ money to finance its factory and create 900 jobs manufacturing natural gas-powered fuel cells. Bloom also promised to install 30 megawatts of “Bloom Boxes” in the state.

The government then modified REPSA to establish a system of discriminatory eligibility requirements, subsidies, and energy-portfolio standards multipliers, all designed to benefit Bloom by denying out-of-state companies equal competitive footing, burdening interstate commerce, and increasing the costs for Delmarva ratepayers, who  might otherwise benefit from fair competition and an open market.

Bloom has quickly pocketed millions.  Yet, to date, the company’s promise of 900 jobs has proven to be empty.  In exchange for massive payments by Delaware consumers, it has created only a reported 50 jobs.

Last June Cause of Action, a government accountability group, filed a lawsuit challenging this backdoor deal. The suit seeks to overturn certain provisions of REPSA for unconstitutionally undermining the competitive market and forcing Delaware utility customers to pick up the tab.  We filed this suit on behalf of one of the many unsatisfied Delaware ratepayers subject to this special surcharge-subsidy, and an out-of-state fuel cell manufacturer whose competitive place in the clean energy market was thwarted by the Public Service Commission’s scheme to prop up Bloom at the expense of its own citizens.

Renewable energy competition means lower prices and better customer service.  But, by denying out-of-state companies the level playing field that they are entitled to under the law, Gov. Markell and the DPSC elevated the interests of a corporate crony over those of Delaware’s citizens and ratepayers.  Delaware utility payers now must pay for a surcharge that can rise rapidly without warning, oversight or explanation.  So the next time Delmarva customers pay their monthly utility bill with the Bloom surcharge, they should ask why their government “rigged the game” to prevent fair competition, and who, exactly, their government serves.

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            The proposed new Data Center in Newark has the potential to create thousands of construction jobs and hundreds of permanent jobs with its billion dollar investment.  Some have suggested the power plant to be built to support the power hungry center might harm the environment.  We take issue with that argument.

 

           Please follow the link below to a powerful video from Jim Black, the Founder of the Partnership for Sustainability in Delaware. He has also served as Chair of the Executive Committee for the Delaware Chapter of the Sierra Club and as a lobbyist for the Clean Air Council.  I would only add two comments to Jim’s remarks in answer to critic’s suggestion the Data Center purchase power from the regional electric grid:

 

  • About half the power reaching Delaware from the grid comes from coal fire power plants which generate twice the carbon dioxide and more pollutants than the planned state-of-the-art natural gas generator in Newark
  • Since much of our power comes from generation facilities in western Pennsylvania and West Virginia we average about an 11% transmission line loss.  That means we burn an extra pound of fuel for every nine pounds of fuel producing useful electricity.  With a power plant on the Data Center site there will be essentially no transmission line loss.  In fact, it is environmentalist pushing hardest the idea of distributed generation, power made where it will be used.         

 

http://delawarebusinessdaily.com/2013/10/former-sierra-club-officer-makes-case-for-data-center/

                                   

Dave Stevenson

Director, Center for Energy Competitiveness

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October 7 marked the 285th anniversary of the birth of Caesar Rodney, the great patriot who as Delawareans know courageously traveled from Dover to Philadelphia on July 1, right as the vote for independence at the Continental Congress Convention.

Ironically, while Delaware was the First State to ratify the Constitution, Delaware was the second to last state of the original 13 colonies to ratify the Articles of Confederation. In October 1778 Caesar Rodney, having been elected president of the state following the capture of Dr. John McKinley in the Delaware river, appeared before the Delaware General Assembly and laid out the Articles of Confederation for ratification. However, the General Assembly was in no hurry to ratify in no small part due to the strong Tory sentiment in Sussex County. In addition the General Assembly, charged with making sure Delaware had adequate representation in the new Continental Congress, saw months go by without having a representative attend sessions. This was at minimum due to the fact that the General Assembly often balked at paying the delegates’ expenses.

President Rodney became frustrated with the General Assembly’s lack of interest in presiding over its business. In a letter to his friend and fellow Kent County politician John Dickinson (who lived in Philadelphia at this time)  that he had “rejoiced” when that two members of the House left early “and thereby dissolved the House”. He followed up by saying “I don’t like to make use of harsh expressions relative to these gentlemen’s conduct-but wish more heartily they had a deeper sense of their Duty.”1

From this letter and historical documents from Delaware’s General Assembly in the late 1770s we see that Caesar Rodney, having risked his life to ride up to Philadelphia to cast Delaware’s deciding vote for Independence two years earlier, was frustrated that local politicians did not share his sense of urgency in regards to supporting the War for Independence.  Caesar Rodney was a man who did not wait for things to be done. He would not have fit into today’s Congress because he would have been adamant that issues get resolved as quickly as possible. For Caesar Rodney’s boldness in doing what needed to be done when it needed to, we at the Caesar Rodney Institute salute him.

Sam Friedman

Communications Director

Caesar Rodney Institute

1. Hoffecker, Carol E. Democracy in Delaware: The Story of the First State’s General Assembly p. 49-50. Cedar Tree Books; Wilmington, 2004.

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From CNBC:

It’s doubtful most people will notice, let alone celebrate, Friday’s 100th anniversary of the U.S. income tax code. But, yes taxpayers, Oct. 4, 2013, is the centennial.

So, happy birthday income tax?

“Obviously, it depends on your perspective,” said Ajay Mehrotra, a history professor at Indiana University.

“But there’s one thing we can take from the period of time when the tax law passed,” he said. “And that is lawmakers got together and realized some permanent form of taxation was needed instead of having a political stalemate that got nowhere.”

One expert sees the 100 years as a system run amok.

(Read more: Five key questions for taxpayers)

“In 1913, the tax code consisted of 400 pages,” said Timothy Nash, a professor of free market economics at Northwood University.

“By 2012, the tax code was 73,608 pages,” he said. “We have gone from a simple tax system to a complex, unfriendly system.”

Taxed from the very beginning

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It was the 16th Amendment, adopted in February 1913, that gave Congress the legal right to levy an income tax. On the evening of Oct. 3, President Woodrow Wilson signed the Revenue Act of 1913 that allowed the collection of a federal income tax—starting the next day.

But having some sort of taxation goes back to the country’s beginning. From 1791 to 1802, the government was supported by tax revenue from the sale of such items as liquor, tobacco, sugar, property sold at auction and even through the sale of slaves.

The high cost of the War of 1812 saw the first sales tax on gold, silverware, jewelry and watches. But by 1817, Congress eliminated all taxes and relied on tariffs from imported goods for revenues.

It was in 1862, to fund the Civil War, that Congress enacted the first income tax. Anyone making between $300 to $10,000 a year paid a rate of 3 percent. That tax ended soon after the war.

Congress also established the Internal Revenue Service at the same time, which had much the same power and authority then as it does now.

Jumping to 1894, Congress passed the first peacetime income tax law, but a year later the Supreme Court declared it unconstitutional. The court said that taxes on rents and real estate income had to be divided among the states according to population, which the law did not allow.

But the court did make a crucial statement in its ruling. It said that Congress had the right to impose a direct income tax—and that led to the passage of the 16th Amendment.

People haven’t always hated taxes

As for most people’s seemingly contentious relationship with the taxman, Mehrotra said it wasn’t always that way.

“It’s a popular perception that Americans hate taxes, but that hasn’t been the case until recently,” he said.

“Taxes in the post-World War II era were very high at a 70 to 80 percent rate in some cases, and people were more or less willing to pay them,” he said.

“But our overall prosperity started to decline in the 1960s and ’70s, and people wanted to start paying less in taxes,” he said.

“We’ve had a real transformation of the economy and a loss of faith in the public sector over the years with Watergate, the Vietnam War, so people aren’t as supportive of the government and what it does as they used to be,” said Mehrotra.

Tax reform unlikely

The tax system has seen its share of changes over the years. In 1943, the withholding tax on wages was introduced for the first time. In 1981, Congress passed the largest tax cut in American history, some $750 billion in cuts over six years. That was partially offset in 1982 and 1984 when Congress raised taxes to the tune of $265 billion.

The Tax Reform Act of 1986 is considered the biggest reform measure since 1913. The top tax rate on individual income was lowered from 50 percent to 28 percent, the lowest it had been since 1916.

But along with the lower rate came the elimination of certain loopholes to make up the lost revenue. And the act put in a $120 billion increase in business taxes.

President George W. Bush signed several tax cuts into law in 2001 for the third-largest tax cut since World War II. President Barack Obama’s tax bill for 2013 kept some of the Bush tax cuts for lower incomes but raised levels for higher incomes, which had been reduced under Bush.

Among other moves, Obama restored the full amount of the payroll tax (6.3 percent) and raised the rates on capital gains and included a 3.8 percent surtax on incomes of $200,000 or more for single people to help fund the Affordable Care Act. The dreaded alternative minimum tax (AMT) received a permanent patch to try to keep thousands from having to pay it.

Calls for tax reform have led to recent hearings on Capitol Hill. Suggestions include going to a flat tax and eliminating deductions like mortgage interest and charitable giving.

“We need a national sales tax or flat rate tax,” said Nash. “Both would reduce the complexity and burden of our current system with a fair tax and the opportunity to abolish the IRS.”

“It all depends on what you call fair,” said Mehrotra, who also supports a national sales tax. “Medicare and Social Security aren’t going away, so we need to fund them.”

“We need taxation for progressive spending, but one thing that would be helpful is if we stopped trying to run every social policy through the IRS,” he added.

“But getting tax reform done won’t be easy,” he added. “Everyone has a special interest they want to protect.”

Hot button issue

Taxes are always a hot button issue. Depending on whose study you look at—or your political persuasion—the U.S. is either the most overtaxed nation on the planet, the least taxed (especially for the wealthy), or it’s somewhere in the middle, as some have said.

Wherever it is, taxes are money for government services, like Social Security. Medicare, defense, federal worker payrolls, veterans’ benefits, education and health care.

And the amount needed keeps growing. The Treasury Department will likely collect around $4.9 trillion from income and payroll taxes in 2014. That’s a huge jump from the $5.4 billion collected in 1920 and the $43 billion in 1945.

If Americans do circle their calendars for taxes, it’s usually April 15, the yearly filing day, not the 100th birthday of the federal income tax.

“One hundred years of what we’ve had has been plenty and it’s high time Congress did something about it,” said Nash.

—By CNBC’s Mark Koba.

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