patrick.net

I think they should outlaw the color blue. Makes as much sense as eliminating the mortgage deduction. Corporate jets? Sure, they're great, I use them all the time.

That is so cool.

@astrid

Carbon Taxation is a very bad idea. This is an area best left to market-based carbon offsets trading. All a tax does is solidify the current set of winners & losers further without materially creating incentives to change behaviors. Environmentalists tend to champion the tax approach because they want a very high price-per-tonne of CO2, mistakenly believing that will yield more capital investment allocated to R&D. Industry heavies want a tax because it creates price stability and raises barriers to competitive entry.

For example, a CO2 tax will seriously disrupt the solar industry which is already entirely dependent upon subsidization for cost justification. If you're a coal-and-gas based utility, you'd love to see that subsidization redirected back into your own pockets.

A free market for CO2 offsets instead creates very strong incentives for those offsets to become efficient to both produce and consume/retire. Price-per-tonne will go down as behaviors change and more offsets are created. Which, at the end of the day, is the goal of all this, no? SP will never get credit for his reductions in air travel so long as we rely upon some Byzantine tax regime.

As I live in the most congested part of the U.S., I just want mine ASAP.
Some times the simplest solutions are the best (or craziest?). Get a parachute and strap a giant fan on your back. See the powered paragliding entry on Wikipedia.
Research done by the USPPA estimates that the activity is statistically safer than riding motorcycles and more dangerous than riding in cars.

Not meaning to pry, but I hope that is not the single reason you are thinking of buying. The fundamental financial separation in renting verses ownership costs still do not justify a purchases decision solely for the tax benefit.

I don't think you're prying, I put it out there. It's not the only reason, but it is becoming a factor. We've stayed out of the market intentionally over the last few years because the prices have run up so much. But we've seen significant price drops. I mean big. Less than two years ago a house like the one we live in was up for sale at $520k. Just a month ago, another one just like it sold for $365k-- in a better location.

Also, the owner of our house has indicated he might be looking to sell in the near future. It might be a good deal for us because he owns the place outright and doesn't need to cover a ridiculous loan. We already pay low rent because the guy isn't too concerned with cash flow. He's hinted that he might sell to us and I think we could negotiate a really good price--comparable to what the market would be at with normal appreciation.

But I don't know yet. Sellers here are getting desperate. I have seen some nice houses go up way below market. I'm not kidding, some prices are in the 2001-2002 price range, which is pretty darned good given the crazy prices we've seen. Granted, it could-and probably will-go further. But if we can afford a house with a traditional loan without killing ourselves financially, it might be the right thing to do.

"For example, a CO2 tax will seriously disrupt the solar industry which is already entirely dependent upon subsidization for cost justification. If you’re a coal-and-gas based utility, you’d love to see that subsidization redirected back into your own pockets."

I'm not following. How could a CO2 tax increase subsidization of coal and gas based utilities? Wouldn't the increase of cost make solar panels more attractive in comparison by increasing the price of fossil fuel power generation?

A carbon emissions tax is a way to price in externalities of pollution. I don't think of it as a punitative measure, merely a way for the government to charge the cost of negative externalities back to the producer. It doesn't get in the way of an efficient market - just the opposite - if properly priced, it promotes the "right" kind of behavior without overt government coercion.

If you want to argue that there such a tax will never work as intended, that's fair enough a critique, though it's hard to see how even an imperfectly administered carbon tax is worse than no tax for polluting the commons.

SQT, I saw similar distress on my recent visit to Florida. Houses that sold for $475 are now $275.

Congratulations on heeding the advice here, and holding off. Congratulations on the empowered position you now find yourself in.

"What other Great American Oil-Burning Industry got destroyed by “class warefare”?"

Good ol' general aviation. Nobody cares if you frivolously sue a "rich man's hobby" out of business. Try suing the NFL for being a monopoly or not having female players.

For that question on large plane fuel consumption: We think in terms of Knots and fuel pounds/hr. At cruise altitude and airspeed, we usually burned about 8,000 lb/hr to go 450 knots true airpeed (KTAS) in the KC135R. JP8 weighs about 6 lbs per gallon, and KTAS is equal to groundspeed without wind.

So in one hour we burn 1333 gallons to go 517 statute miles, or about .39 miles per gallon. I never though about it that way before. Also, I presume that modern comercial jets are more fuel efficient than old military aircraft.

@astrid

I'm assuming that CO2 taxation will not be levied upon end-consumers. I don't believe we'll see that, for reasons of Realpolitik again.

Therefore taxation would be levied upon enablers and producers. They will in turn allocate these costs across activity bases and products as best maximizes their marginal revenues, irrespective of which activities produce CO2. Further, certain industries such as pharma and chemicals are essential industries but are heavily carbon intensive (both as emitters and energy consumers).

A tax regime makes things worse by placing the capital allocation burden upon government which they cannot be hoped to do effectively. Not just for cynical reasons, but because government are not experts at industry specific capital projects. Taxes will also tend to inflate all consumer prices, regardless of the "green-ness" of those products. If I'm P&G and you levy a CO2 tax upon me, I'm going to allocate that broadly and inflate all my products, green and brown alike.

CO2 offsets instead move the burden and benefit of behavior to the source, all along the value chain. Trading of offsets enables proper market forces to allocate capital effectively. The pharma and chem industries will be forced to purchase offsets on the market at a price which (assuming a liquid market) properly reflects the externality. Right now, tax proposals (I just read the whole CA and Regis-area proposals) are simple one-price caps or $/tonne schemes which will have a terribly regressive effect on capital allocation.

The reason solar will be hurt by a CO2 tax is again because you're not taxing the household but the power generator. The household gets some benefit from reduced demand in terms of pure price, but solar economics in the US are somewhere between 60%-80% pure subsidization, which now come from a dedicated subsidy source. I guarantee this will go away after a CO2 tax is levied, and now everyone will fight for that tax revenue, solar, wind, the RECS source markets and industry. If industry doesn't get any of the tax $, then what's the whole point of the tax? Just to punish them for making the things we demand as consumers?

I understand that CEO’s/CFO’s etc. often feel more comfortable with in-person ‘hand-shake’ rituals, especially in deals involving commitment of money, but that may only be because they are generally a generation or two older.

holograms. the future is in holograms...

anyone heard of 'peak oil'? we should be working on force-field anti-gravity machines instead of gas guzzlers...

implying that MID is a government handout to an undesireable class.

In Oz, it IS a govt handout to an undesirable class, because it is deductible only on investment properties, not on owner-ccupier homes, thus representing a massive tax handout to landlords. The gurus/spruikers play on this heavily when they try to sell properties or 'secrets of the rich' in seminars, as they tell you the taxman will be equal partners in your loss if you go underwater on an investment property -- in fact, they encourage you to go underwater, as 'it always goes up 20% a year, so in 10 years your capital appreciation will save you, and you will retire rich!!!'

See this article on my blogspot:
How tax system egged on property speculation
Five years ago Treasurer Peter Costello told Australians: "Work for a living and we'll tax you at close to 50 cents in the dollar; speculate and we'll only take 25 cents.

"Not only that but, as a special deal - while stocks last - we'll pay half your speculating costs."

Naturally a million Australians have started speculating on real estate. When the money ran out they borrowed more, much more. Prices doubled, so did debt.

As Professor Cameron Rider of the Melbourne Law School put it to a recent Productivity Commission public hearing into the problem: "Everyone was exuberantly rational."

To quote last week's report on first home buyers by the Productivity Commission: "Like many participants [in its inquiry], the commission has concluded that these general taxation arrangements [capital gains tax, negative gearing, capital works deductions and depreciation provisions] have lent impetus to the recent surge in investment in rental housing and consequent house price increases."

woops, try this one -- this is to do with revision of the capital gains tax, as well as MID for investors:

Landlords and speculators reap billions from tax rule changes

Tax breaks for property investors have delivered a far greater boon to speculators than previously thought, gouging billions from tax revenues with the benefits going overwhelmingly to the rich.

The 2002-03 Taxation Statistics show capital gains tax revenue plunged from $5.3 billion to $3.3 billion in three years following radical changes to the system in 1999. The changes were touted as revenue neutral at the time.

The Tax Office figures, published on Friday, also show the national negative gearing gap between rental tax deductions and rental income more than doubled in just one year.

The figures show it is now far more tax-effective to buy and sell assets than earn a salary, as investors receive generous tax breaks from rental losses and further tax breaks when they sell.

The capital gains tax changes announced by the Treasurer, Peter Costello, in September 1999 - against Treasury's advice - gave individuals a 50 per cent tax discount on assets sold after being held for more than one year.

The changes were a "grossly unfair give-away to the rich" and had shifted the tax burden from property owners to salary earners, said Professor Chris Evans, director of the ATAX tax school at the University of NSW.

Now I would be quite happy to “stick it to” guys like Surfer-X.

and I'd be quite happy to stick it to your fat fucking wife, that is if I were a pig fucker. Now go fuck off boomer, don't you have a car show to go to?

@Randy,

If you think that solar energy subsidies must go away with the arrival of a carbon tax, then that in indeed be a loss. Solar energy (like childhood immunization or HeadStart) is one place where a short term government subsidy is warranted and likely to result in long term payoff. But the goal of this subsidy should be incubating new technology, not making an environmental impact.

(I'm sure the impact of solar energy subsidies on actual US carbon emission is very close to nil - *green* yuppies nowadays seem to think hybrid or solar panels or organic raspberries just entitles them to a bigger house or a more powerful car or organic raspberries from Chile - and then lord it over humble Honda driving cardigan wearers like me.)

However, I'm still sure that a carbon tax, even one targeted at producer rather than a VAT (CAT?) for carbon emission, would decrease the US's carbon production. High prices will curb consumption, manufacturers will eventually move towards lower carbon emission techniques. There's short term inflationary pressures due to short term inelasticity, but the long term result, in theory, would be a more accurate pricing of total cost of consumption.

This is more theoretical than real as a solution. The Democrats don't have the will to push through something that would make a real impact and the GOP is currently controlled by Pentacostalists who think they're going to be raptured up in their lifetime. The political will is definitely missing.

RandyH said:
SP will never get credit for his reductions in air travel so long as we rely upon some Byzantine tax regime.

Wait - you mean I can actually claim carbon credits for meetings that I don't show up to? Sweet, where do I sign up? :-)

Seriously, is there a GAAP-like way of tracking this? I don't care about the money, but the credits would be a new kind of dicksize-war with the other teams...

SP

My goodness. Surfer-X appears to have had too much caffeine in his morning latte today. Get back to work, young'un, and pay your FICA taxes so that I can get fat social security checks to spend on my permanent vacation.

"The deductibility of paid mortgage interest from income does not help house buyers. It simply drives up the cost of housing to the point where it is just as unaffordable as if there were no such deduction. "

I think Patrick's original theses is sound.

How about also taking away the deduction for property taxes? Wouldn't this have a similar effect? Doesn't the deduction for property taxes also drive up the cost of housing?

Dennis,

>How about also taking away the deduction for property taxes?

For this zinger, I predict the "no-double-taxation crowd" will be coming after you with a flamethrower or worse :). Actually, I don't think this is a good idea,
again because it creates an advantage for businesses to own a home relative to an individual homeowner. If you are a business, you can always pay anything with pre-tax income. That is pretty much the defining characteristic of a business in the US, if you ask me.

HeadSet,

Thanks for the numbers on airplane MPG. It struck me about a year ago that too little was known about the energy effectiveness of air travel, and I have been trying to calculate the MPG/passenger of a 737,. 747, 787 and so on. You can calculate some pretty good estimates using various consumption figures that are available on the web, wikipedia et al.

One limiting aspect of figures is that they tend to be "cruising speed" numbers. I have not been able to find good numbers for the takeoff/climb portion of a flight. It must be significant, especially for shorter flights. After all, it takes quite a bit of work to lift 100ton of airplane to 10km altitude, and the process is probably quite ineffective relative to cruising, apert from the pure consideration of potential energy. Do you have any KC135 numbers for this portion of the flight?

Another aspect of airplane travel is that although 50-60mpg/passenger sounds pretty good, people tend to fly much farther than they drive.
Also, a car that gets 30mpg will get 60mpg/passenger if you have two passengers.

Randy,

I think the "handshake/face-to-face business meeting" has its place. I
just don't think anyone needs to do this so often that flying commercial
is a real problem. There are notable industry leaders that insist on
flying coach. John Chambers of Cisco is one of them, and I think his
company has been doing quite well over the years.

@astrid

I'll be hosting an in depth Carbon and CO2 (CO2e) discussion on my Capitalism 2.0 blog very soon. For obvious reason, I'm very engaged in these debates and discussions right now. I am not knee-jerk reacting to tax proposals. I think some of them have merit. However I am very wary of the unintended consequences and the true motives of industry. For the record, my company is actively developing 2 major product lines, both of which would survive under a tax regime as well as a market regime. I'm most interested right now in the effect on end-consumer behavior.

(segue to SP)

@SP

We're working on just such a product right now. We're in the process of establishing property rights and ownership claims for end-user CO2 credits. In other words, not the "I'm cool because I bought credits from TerraPass" thing, but a true "my behavior has certifiably and verifiably created offsets which are detachable and tradable assets" thing. We're getting tremendous interest so far in this, and we're still quasi-stealth, which is a good sign. And, there are two of us from this blog now working on the venture...

Check Capitalism 2.0 in the coming week or so for a continuation of this specific discussion. I don't want to hijack Patrick's forum and turn it into a Carbon Bubble Blog, lol.

Different Sean:

You understand that income tax taxes income right? Your post about landlords requires me to explain something as a recent landlord. An investment property is viewed as a small business. In the States and here in San Diego specificially you actually even get a business license per unit. Rental income is taxed in the same way as your net paycheck here, or the same as if you open a flower shop. Rental income, or flower shop income is calculated the same way, gross sales, minus expenses leaves net taxable income.

Interest is deductible in both scenarios. Interest is a business expense. This is not a subsidy in any sense of the word, it is a hard cost of doing business. The discussion here is about MID because in the states individuals can deduct mortgage interest which is leftover from when the tax code allowed all interest regardless of who it was paid to be deducted. This was because interest is a real cost to income both individual and business, just as a casualty or loss. It is fundamentally wrong to tax interest income, and not allow a deduction for interest expense, the result is a bizzare point of view now that says income tax should apply to an expense, that's not income tax that's basically an IRS shakedown.

surfer-x Says:
July 6th, 2007 at 1:37 am
"Now I would be quite happy to “stick it to” guys like Surfer-X.

and I’d be quite happy to stick it to your fat fucking wife, that is if I were a pig fucker. Now go fuck off boomer, don’t you have a car show to go to?"

That's the funniest thing I've seen all week.

Randy,

That sounds exciting and I look forward to following the discussion. I am particularly interested to hear about ideas for viability in a no carbon tax scenario -- that's probably 5X more viable than a properly imposed carbon tax.

RandyH said:
We’re working on just such a product right now.

I just (i.e. since this morning, in lieu of real work, natch) wrote a small RoR program to track meetings and miles.

The model I used is that for every online meeting spanning N locations, with P1+P2+...+PN people in various locations, I calculate the smallest cumulative distance all of those people would have to travel in order to gather in one place. The algorithm to do this currently sucks a bit (approx NLogN), but will do for v0.1. :-)

Each online videoconference then gets C$ equal to the number of miles avoided divided by the length of the meeting in minutes.

If I get more time, I want to add other metrics to track the dollar-value of the meeting, etc. so we can get a better handle on carbon-savings per dollar of value add.

Official launch was around 12.15pm today. I even got a couple of neighboring teams excited enough to start putting their hours in. Time to go grab a well-deserved snack...

SP

Cool product SP. I can envision a few different cost accounting and resource management applications for something like that.

SP,

That's really cool!

You might have to price exhaust per unit to make it a meaningful accounting tool. Are there any stated or implied goals in addition to tracking carbon emission savings derived from video conferencing?

On the other hand, it would be a snazzy add-on to your company's (free?) online work productivity suite. Toss in a calcultor for travel time saved and this could get quite mesmerizing very quickly, much like the Prius MPH meter.

I was thinking beyond estimating carbon settings. A quick logic program like that could allow someone planning a meeting to put in different locations to minimize overall travel costs, or a project manager might have to capture costs for a job code so the software is an auditing tool, there are all kinds of accounting uses with modifications to the concept.

I'm not sure that such a tool would be appropriate as auditing. There's some nuance to how meetings are scheduled that a computer program cannot capture (how much should you value a CEO's travel time versus a VP of sale? IT Director?). I would welcome a non-travelling scheduler that automatically look at individual calendars to recommend scheduling times.

astrid said:
Are there any stated or implied goals in addition to tracking carbon emission savings derived from video conferencing?

Whoa, great ideas all, glad you like it. I got the idea around 7.30 this morning, when I was half-jokingly responding to something Randy said. But then it just stuck with me so when I got in (and half the team were taking friday off), I just kinda started coding it.

The only 'stated/implied' goal was to see what we were saving with all this online meeting stuff. Didn't really think too far ahead of that. I like the Prius-meter concept - will try to hook up the data to a meter-widget. I thought about capturing time-savings as well, but wanted to keep this focused on 'pure-carbon', and also something I could bang out in a day.

SP

Astrid, I'm sure you know that Outlook does what you are talking about. Basically you can view everyone's schedules together to block out a chunk of available time for a meeting request.

@SP and all

Awesome! This kind of data and calculations are very useful. The problem is certifying those credits to actually be a real asset is a tremendously complicated, expensive and time-consuming process.

But if anyone has any great front-end solutions you should contact me (and keep an eye on my blog, and from there our "official" blog). At some point soon we'll be looking for folks with end-user applications to sign up as affiliates, partners, etc. And if you happen to be a RoR "playa" (no, actually a serious software engineer/developer with lots of pre-RoR experience developing hard core apps), then I'll try to hire you.

Malcolm,

That's where I got my idea from, though I was thinking of a tool for social networking or for larger 30+ person events where eyeballing would not work too well.

This could be particularly useful is Google can capture the certain information automatically from Outlook and feed it to Google Calendar (can it do that already, just wondering...). That opens up a lot of social networking possibilities with friends and people outside of one's company network.

-is
+if

Interest is deductible in both scenarios. Interest is a business expense. This is not a subsidy in any sense of the word, it is a hard cost of doing business

Exactly Malcolm, that is what all these people who are advocating for the elimination of the mortgage tax deduction don't realize: homeowners would just form a corporation that would own the property and then rent it back to the homeowner. Businesses can deduct the full cost of doing business, including interest costs, so this would be a wash. It would be a great boon for accountants and lawyers, to set up all the new corporations that would spring up.

Jimbo,

The state-tax federal-tax nexis is a tricky issue. On one hand, it's unfair to ask taxpayers to pay taxes on income they don't have and on the other hand, it's an incentive for the state to creep their tax collection away from sales tax and poach from federal tax revenues.

I'm pretty sure such a corporation would fail the business purpose test and it would be plenty easy to prevent people from taking advantage of such a loophole.

Zephyr, your tax analysis leaves out the 2/3 of taxes collected that are not income taxes. Payroll taxes, sales taxes and use taxes are all regressive and fall most heavily on the lower 90%. Property tax and investment taxes fall on the middle class and wealthy.

You make the assumption that the only way to recover the lost revenue by eliminating the mortgage interest deduction is to raise income tax and I think that is a huge (and mistaken) assumption.

I think at the very least, Jimbo is saying that when the tax code becomes too punishing people get creative. What comes to mind is what I was saying earlier which is now that regular interest isn't deductible the financially sound thing to do is move all your debt onto your house to deduct the interest. This is contrary to the reason public policy favors MID because instead of having real home ownership, these screwups end up just using their house as an interest loophole instead of paying their loans down. There will always be loopholes, and the more complicated we make the tax code, the more inefficient the whole thing becomes.