While Your Investments Were Shrinking . . . .You Helped Wal-Mart

Chuck Sheketoff

What's wrong with this picture?

While Oregon families have seen their Oregon 529 plans turn into 0.529 plans, their 401K plans turn into 0.401K plans, their homes’ values shrink, and interest rates on their savings accounts and CDs drop to next to nothing, taxpayers in the State of Oregon have been helping Wal-Mart make a nice return on its money.

Here’s how it happened. According to data released by the Oregon Department of Energy, three companies – Klondike Wind Power III LLC, Fort James Operating Company-Georgia Pacific, and SolarWorld – made investments that qualified for $33,432,361 in Business Energy Tax Credits (BETCs). The three companies apparently pay little or nothing beyond Oregon’s $10 minimum corporate income tax, because instead of taking the tax credits they sold them to Wal-Mart for $22,513,334. The companies took $22 million from Wal-Mart for their $33 million in tax credits.

In return for its $22 million, Wal-Mart will receive from the State of Oregon $33 million in tax credits over five years.

Even though Wal-Mart itself hasn’t saved a single BTU or generated a renewable BTU in the deal, when the State finalized the deal the State thanked Wal-Mart for its "efforts saving energy and participating in the tax credit program."

So Wal-Mart is getting from Oregon taxpayers a guaranteed 49 percent return on investment courtesy of the State of Oregon at a time when public services enjoyed by the typical Oregonian are threatened with 30 percent cuts because the state doesn't have adequate tax revenues.

Maybe it’s time for the Legislature to re-think the transfer of BETC tax credits.




Ocpp_final_1 Chuck Sheketoff is the executive director of the Oregon Center for Public Policy.   You can sign up to receive email notification of OCPP materials at www.ocpp.org

Comments

  • jamie (unverified)
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    This just shows the corruption, folly and idiocy of these green schemes.

    Why do you complain when some one, other than you, figures out the flaws in your system?

    If you really cared about Oregonians, you would dump all of these nutty "green" schemes and just let people do things the way they each find best.

    But progressives care more about effort then accomplishments.

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    But now these three companies have $22 million more in capital to invest in renewable energy (which presumably creates jobs) right away, instead of $33 million over 5 years.

    Shouldn't we be glad they have some additional capital to invest in our ailing economy right now?

  • Matthew home (unverified)
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    Come to think of it, we are not only dealing now with economic crisis but also with climate change. So I think it's okay for the 3 companies to be investing in renewable energy.

  • Kurt Chapman (unverified)
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    Chuck, certainly an interesting perspective. Isn't the system of credits set up and working EXACTLY as planned?

    What makes this any different than "Cap and Trade"?

    Is it that some company sold their BETC's for cash, or that Wal-Mart purchased them?

    I guess that this is no different than purchasing a structured settlement or annuity from someone at a current cash discount.

  • Jimbo (unverified)
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    But now these three companies have $22 million more in capital to invest in renewable energy . . .

    It's a pretty big assumption that these companies are going to take the money and investing in renewable energy. They could just as easily hand the CEO and the others at the top a big fat bonus, or a dividend to shareholders.

  • C.R. (unverified)
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    So Chuck,

    Legitimate outrage aside, are you concerned enough about this to give us a dispassionate recitation of the role of Democrats and Republicans in giving us this system? It looks like it is working exactly as intended, so if there is a problem with who benefits, the blame has to lie with the elected officials who created and voted for the system.

    Give us names, party affiliations, and bill numbers. And the names of lobbyists and interests groups who pushed for those votes.

    By the way, I went to your website and can't find the names of the major funders of the OCPP. Any reason for that?

  • (Show?)

    It's worse than you think. Not only do unprofitable companies get the tax credit, then sell them at a large discount to companies (or individuals) with an Oregon tax liability, but SO DO GOVERNMENT AGENCIES!

    So when one state agency makes an expenditure that qualifies under the BETC, the state grants it tax credits, which it sells at a discount to recoup some of the investment.

    If the state wants to incent its agencies to do "green" stuff, why wouldn't the state just give the agency the equivalent amount of the tax credit from the general fund? This is just idiotic.

    It results in costing the state another 30% or so (whatever the discount is) on its green investments. It is almost unimaginable how stupid this is. The state government can't even figure out how to pass money from one pocket to the other without letting 30% fall out in the form of a giveaway.

  • alcatross (unverified)
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    Chuck says: Maybe it’s time for the Legislature to re-think the transfer of BETC tax credits.

    So Oregon public employees hired before 1996 are guaranteed an 8% percent return on their pension accounts courtesy of the State of Oregon at a time when public services enjoyed by the typical Oregonian are threatened with 30 percent cuts because the state doesn't have adequate tax revenues. All while Oregon families have seen their Oregon 529 plans turn into 0.529 plans, their 401K plans turn into 0.401K plans, their homes’ values shrink, and interest rates on their savings accounts and CDs drop to next to nothing - not to mention the fact most Oregonians no longer 'enjoy' defined-benefit pensions.

    So while the Legislature is re-thinking things, maybe it's time to re-think that guaranteed 8% return on PERS pension accounts.

  • alcatross (unverified)
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    Rob Kremer says: The state government can't even figure out how to pass money from one pocket to the other without letting 30% fall out in the form of a giveaway.

    LOL - and this is the same state government that some of us here at BO are always told doesn't have a spending problem... Right - this is also the same Chuck Sheketoff that told us ......levels of spending and taxes in Oregon have not been going up despite the fact Oregon state government spending has grown 40 percent from $34 billion to $48 billion over the past four budget cycles.

  • Richard (unverified)
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    The problem is Chuck and other blues not only haven't picked up on the lunacy Kremer pointed out but they will not pick up on even now. Preferring instead to avoid embarrassing their blue brethren running the show.

    Just watch how fast they move on with their nothing to see here partisanship.
    After all, they can't let a conservative raise any red flag they'll recognize.
    And as if this is the only example of lunacy being ignored by the controlling blueness?

    Back to being green now.

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    Rather than targeted tax credit subsidies for alternative energy project, I’d prefer a substantial, revenue neutral carbon tax (either on gas as a priority or more generally) that would raise the price of carbon emitting fuels. Such a tax would be the only incentive needed for alternative energy projects.

    But we do not have a carbon tax and we need to do our part to reduce carbon emission causing global warming/climate change. So tax credits are better than nothing. I do not think I have a problem with the transfer of tax credits. In your real example, I do not have a problem with Wal-Mart buying the credits, but I do have a problem with the three companies having so little tax liability that they needed to sell the tax credit to get any value from it.

    I also think that tax credits generally are an uncontrollable expenditure of state dollars. Oregon, for example, did not budget for the $33 million specifically. (Someone correct me if I am wrong.) I would support, as we cut back in other areas like human services and education, that we cut back on energy tax credits. I share your concern for human services funding. I am further distressed that my own priority bills to expand Mandarin programs and create a Go Global High School Study Abroad Program (costing no additional dollars) have now died in committee. So I am generally concerned that the priorities emerging in the state 2009-11 budget may not be ones I fully support.

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    As several people have pointed out, the program is working exactly as it was intended. That doesn't mean it isn't crazy.

    Let's assume that state government providing a financial incentive for saving energy or using green energy is a good idea (in other words, leave the philosophical and ideological objections aside for the moment). Wouldn't it still make more sense to just give the money to the company that is actually saving the energy or using the green energy, rather than forcing them to look for someone to buy the tax credits for 65 or 70 cents on the dollar?

    Now to be fair, this whole nonsense started with the transferable low-income housing tax credits at the federal level (a Republican plan), but that is no excuse for Oregon to compound the problem at the state level.

    As Rob Kremer pointed out, there's a 30% loss in the effective subsidy since most of these companies who qualify for the tax credit don't have the income (and hence the tax liability) to use it themselves. Seems to me we could save money AND still provide the same incentive just by giving money directly to the company itself.

    Unfortunately, this may mean I'm agreeing with Chuck Sheketoff on something, so I reserve the right to recant this view if I find I just can't live with that prospect.

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    Rob Kremer is correct that it makes no sense for the state to take and then sell a BETC credit. This practice was exposed in an article in the Pamplin papers about the BETC waste, and if Richard reads it he will see that I've gone on record calling the practice "nuts."

    As to C.R.'s comment about OCPP's funding, while like all 501(c)(3)s we are not required to publish the information, we do list major funders in an acknowledgment placed at the end of most reports. When CR points a finger, three come back at him/her....CR won't even disclose his/her name! And if CR wants to see who voted for or testifies in support of the BETC and RETC programs, she/he can look it up - it is all a matter of public record.

  • Richard (unverified)
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    Thank you Chuck.

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    Jack, I can live with it. I think we probably agree on a number of things...the sun rises in the east and sets in the west, gravity happens, etc.... that are true. And simple math is, if you assume we need to give companies an incentive to save money in the long run it would make more sense to just give them the discounted figure and cut out the Wal-Marts who are being unjustly enriched. And you probably agree with me and Rob Kremer that having the state "take" a tax credit and transfer it to an outsider who will make a 49 percent return on the "investment" makes no sense, as well.

    What a great day. The sun is shining and we're agreement!

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    So, Chuck, you think gravity just happens?????

    Hmmmmmm . . .

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    Jack, I didn't use the word "just" . . . and I suspect if we boned up on our ability to understand and explain physics we could probably reach agreement as to why.

    Have a good weekend.

  • Richard (unverified)
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    I can't imagine a better demonstration of stupid government than this example where Chuck Sheketoff and Rob Kremer agree the policy is nuts.

    "The state government can't even figure out how to pass money from one pocket to the other without letting 30% fall out in the form of a giveaway."

    This should be a front page story with Kremer and Sheketoff quoted and the legislature dropping most of what they are working on till this is fixed.

    Imagine the many lame things that are killing time in Salem while this monumentaly stupid policy continues. ld be

  • Bob Tiernan (unverified)
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    jamie:

    But progressives care more about effort then accomplishments.

    Bob T:

    Or image over content, hence their puffing over having an openly gay mayor as an end in itself--never mind that he's been instrumental in giving us the current screwing-over regarding the corporate sports welfare scam.

    It wasn't even a post-election surprise that he wanted this.

    Bob Tiernan Portland

  • Jiang (unverified)
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    But progressives care more about effort then accomplishments.

    That is exactly backwards. Progressvies abhor the participation society.

    Now, I've listened to your pseudo logic long enough. I want a meaningful retraction of that, or I will personally return to make your posting life more pointless than it already is. Ask those that have been around here a few just how royally I can do that.

  • Virgil Breedlove, Jr. (unverified)
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    hence their puffing over having an openly gay mayor as an end in itself

    Get back to work and stop dreaming about the openly gay mayor getting hsi end in yourself. Sam isn't even sexually progessive. Won't consider teabagging!

    Admit your real position. Real men don't moisturize.

  • Christian (unverified)
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    ""The state government can't even figure out how to pass money from one pocket to the other without letting 30% fall out in the form of a giveaway."

    This should be a front page story with Kremer and Sheketoff quoted and the legislature dropping most of what they are working on till this is fixed."

    It was a front page story: http://www.portlandtribune.com/news/story.php?story_id=123922658482244700

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