It is very difficult to argue against wise US government policies, which encourage Energy Efficiency Investments to existing Buildings of all kinds….personal home residences; private commercial buildings; US, State and Local Government buildings; and Non-Profit Organization buildings.
Not only do you create a lot of US jobs by this wise initiative, but you help the US make significant strides in achieving its critical long-term goal to be energy independent, and you also save substantial amounts of future annual energy costs of these individuals and organizations.
Here are my proposals to really fire up these Green Building Retrofit Investments, and to do so without costing the US Government a dime.
Explosive Tax Incentives for Green Building Retrofit Investments on Personal Home Residences
For all home residence green building retrofit investments, as defined by the US Dept of Energy, made by individuals in the remainder of 2011, an additional upfront bonus energy tax credit of 30% of the cost of these green investments would apply, and for similar green investments made in 2012, the additional bonus energy tax credit would be 20%.
All of these individuals will also receive for many years the continuing lower energy costs resulting from making these wise green investments on their homes.
My recommendation to pay for the US Government energy tax credits granted to these individuals making these job-creating green investments on their homes is by having these individuals refunding to the US Government over each of the next 9 years, as energy cost saving rebates, the total upfront US government energy tax credit divided by 9. The overwhelming majority of this can be done by including it as an additional tax owed in future year federal individual income tax returns.
Explosive Tax Incentives for Commercial Green Building Retrofit Investments
For all commercial building green retrofit investments, as defined by the US Dept of Energy, made by businesses in the remainder of 2011, an upfront energy tax credit of 15% of the cost of these green investments would apply, and for similar green investments made in 2012, the energy tax credit would be 10%.
There would be no CBO scored cost to the US Government for large multinational corps making these green retrofit investments here, because I would require them to pay for it with a like amount of foreign earnings dividend repatriation tax, computed perhaps at a somewhat discounted federal income tax rate.
As one option to pay for these green building retrofit investments by other than large multinational corps, I would consider letting the US Infrastructure Bank supply the financing, at a somewhat favorable interest rate. The total interest received by the US Infrastructure Bank should far exceed the total bad debts here. And this excess cash inflow by the US Infrastructure Bank should be able to easily exceed the US Government Energy Tax Credit outflow.
As a second option to pay for the energy tax credit from these job creating green investments by these businesses other than large multinational corps, I would consider doubling this energy tax credit to 30% for 2011, and to 20% for 2012, and requiring these businesses to refund to the US Government over each of the next 9 years, as energy cost saving rebates, the total upfront Energy Tax Credit divided by 9.
I would make this Energy Tax Credit refundable on the front end.
In addition, I would give highly-charged accelerated tax depreciation for all Commercial Building Green Retrofit Investments, and to wisely do so without a CBO scored cost over the next 10 years.
Presently, real property tax deprecation is spread over many years, much longer than the ten-year CBO scoring period.
My proposal here is to allow businesses of all sizes that make commercial building green retrofit improvements in the remainder of 2011, or in all of 2012, to get first-year tax expensing of the entire first 9 years of tax depreciation allowed presently under the tax rules.
Then, the tax basis of the investment made gets reduced for the first-year tax depreciation taken. Thus, they wouldn't be allowed any tax depreciation deductions on this building improvement in the following 8 years.
And then, all tax depreciation taken after the first 9 years under present tax law, would be dramatically accelerated in some fashion, such as by cutting the remaining tax life in half, and thus doubling the annual tax depreciation starting in Year 10.
This highly incentivized scheme doesn’t change total real property tax depreciation, it just accelerates it dramatically from Years 2 through 9 to Year 1. And it also accelerates it starting in Year 10. Because you are just moving total tax depreciation around among years, there shouldn’t be any long-term CBO scoring cost to the US government for this initiative.
And then to really help small and medium-sized businesses, as well as larger business in a federal income tax loss situation, particularly those in the Rust Belt, I would also let them choose a first-year tax equivalent refundable 35% investment tax credit, in lieu of the first-year real property tax depreciation resulting from this initiative. And if a company chooses this 35% investment tax credit option, it would not be allowed any tax depreciation deduction in the first 9 years, and after reducing the tax basis of the real property, it would start tax depreciation in the 10th Year, on a very accelerated basis.
In addition, these Commercial Building Green Retrofit Investments would be among those allowed as eligible property additions in my Explosive Jobs & Investment Tax Credit (EJ&ITC) combination proposal I previously offered in a recent earlier post.
US Government Green Building Retrofit Investments
A fair CBO scoring for US Government Green Building Retrofit Investments should be substantially positive.
The CBO has to score the US Government Green Building Retrofit Investments as cash outflows.
And logically, the CBO also has to score the subsequent years annual energy cost savings as cash inflows.
When I sketch out the rough math here, I get the subsequent years annual energy cost savings substantially trumping the initial cash outflows.
Thus what I would also do is to use the positive CBO scoring here to fund other wise US Government Infrastructure Investments, like roads, bridges, airports, and the like.
State and Local Governments, Schools, Colleges, Non-Profit Hospitals and Other Non-Profit Organizations Green Building Retrofit Investments
These organizations don’t pay federal income tax, for the most part. Thus, an energy tax credit incentive wouldn’t apply, and neither would an accelerated tax depreciation incentive, and also neither would my earlier proposal for an Explosive Jobs & Investment Tax Credit apply.
Thus, instead of an energy tax credit, I propose that the US Government grant substantial upfront subsidies to these organizations, which make building green retrofit investments, as defined by the US Dept of Energy. These subsidies should be substantial to encourage widespread building energy efficient investments, with the resultant job creation, along with the resultant significant strides in reaching the critical US goal of energy independence.
Thus, I propose that all of these organizations other than Non-Profit Hospitals get an upfront US government subsidy for 35% of the cost of these Green Building Retrofit Investments made in the remainder of 2011; and for similar green investments made in 2012, this US government subsidy would be 25% of the cost of these green investments made by these organizations.
In all fairness, Non-Profit Hospitals will be ponying in a substantial amount of money to reduce the US Debt level in the present Debt Ceiling negotiations in the US Congress. Thus, I think it would be wise to at least somewhat offset this substantial funding by the US Government giving Non-Profit Hospitals making Building Green Retrofit Investments highly-charged subsidies.
Thus, I propose that all Non-Profit Hospitals get an upfront US government subsidy for 45% of the cost of the Green Building Retrofit Investments they make in the rest of 2011, and for similar green investments made in 2012, this US government subsidy would be 35% of the cost of these green investments made by these hospital organizations.
All of these organizations will also receive for many years the continuing lower energy costs resulting from making these green investments.
My recommendation to pay for the US Government subsidies to all of these organizations making these job-creating green investments is by having these organizations refunding to the US Government over each of the next 9 years as energy cost saving rebates the total upfront US government subsidy divided by 9.
