Friday, March 14, 2008

Not wind farms, but tax farms

Let's ignore for a moment the fact that wind power is a phony green solution that destroys the environment in the name of saving it. Never in history has an industry been so heavily subsidized by taxpayers. Consider the accelerated depreciation of wind farm assets. Conventional business assets depreciate annually, but always retain some value for taxation as long as they remain functional for income generation. Not so with wind turbines. At the federal level, turbines become tax-free assets form wind corporations after 5 years. No other business gets a handout on this scale.

In the case of the Hays project, let's assume an asset value of $500 million for 'phase one' and an initial assessed value of 60%, or $300 million. Assuming a mill levy of 1.5 % the project should pay $4.5 million in taxes to local government their first year of operation, declining with annual depreciation thereafter. (No wonder they offer $500,000 in lieu of taxes!) Due to accelerated federal depreciation, they can reduce their income tax payments by around $175 million over this period. Since state income tax is calculated on federal payments at a 7.35% marginal rate, Kansas will chip in $12.8 million in tax breaks over the same period. If you own any kind of business, you have to be jealous.

Now let's look at the production tax credit. If renewed by Congress, it would amount to 2 cents per kwh. In terms of energy, this is like the federal government allowing oil producers to sell 2 out of every 5 barrels of oil they produce tax-free - under the table as it were. That would mean million's of dollars of tax-free money for Iberdrola annually - above and beyond all the tax breaks they would get on their remaining income - and all because of politician's generosity with your tax money.

Think you've paid enough? You're not finished yet. Because even with all these subsidies, wind power is far more expensive than conventional power, so you can expect a minimum 50 % increase in power bills over the next five years as utilities pass on the higher price of wind energy - and the increased costs associated with wind power distribution and integration - to their rate-payers.

Neighbors of wind farms invariably see their property values decrease and their residences become more difficult, or even impossible, to sell. However, because of the way regional property taxes are calculated, their property assessments typically increase as a result of wind 'development' and they end up paying higher property taxes, while gaining nothing but annoyance, financial damage, and environmental degradation from the project. So whenever you drive by a wind farm be sure to admire the view. You're paying for it, and so is everyone living anywhere near it.

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