Taxing the Sun

The new 30% tariff on imported solar panels looks like a direct economic hit on the alternative energy industry, imposed by the dinosaur in the White House.  That the man is owned by the oil industry is becoming increasingly obvious.  First there was the okay to the final segments of the Keystone XL pipeline.  More recently, just about the entire coastline of the US has been offered for off-shore oil and gas drilling.  Our Secretary of State is former CEO of Exxon, and the head of the Environmental Protection Agency has spent much of his career fighting the EPA.

Now we have a 30% tariff on solar panels?  According to an Associated Press report, the tariff was sought by Suniva, Inc., which sought bankruptcy protection in April, and by the American subsidiary of Germany’s SolarWorld.  They claimed the 500 percent increase in imported solar panels over the past five years has led to a ruinous price collapse.  Nearly 30 American solar-manufacturing companies closed in that time.  They claimed big, bad China plotted to flood the global market with cheap products to weaken US manufacturing.  Apparently foreign companies manufacturing in the US are exempt from the tariff, but they now have more wiggle room to raise prices.

So the US President jumps in to stop China in its tracks, apparently, and to raise the price of solar panels for everyone.  But, as Senator Ben Sasse, R-Neb, claimed, tariffs are a tax on consumers.  Moreover, a tax on imported solar panels will reduce choice and supply for everyone, forestall or delay installation, and constrict employment in the alternative energy field.

A tariff is defined as a tax or duty on a particular class of imports or exports.  It is claimed “protective tariffs” are intended to make domestic products more competitive.  Tariffs are not new in the US, with the first imposed in 1789. Since then, well over thirty acts affecting tariffs have been implemented.

The 1789 tariff, also called the Hamilton Tariff Act, was the second piece of legislation passed by the fledgling US Congress.  Two years later, excise taxes on whiskey, run, snuff, and refined sugar were initiated.  The purpose of both types of taxes, according to the first Treasury Secretary, Alexander Hamilton, was to pay Revolutionary war debt, allow the government to function, redeem at full value federal debts, and pay the debts of states.

President George Washington made protective tariffs a national security issue.  In his 1790 State of the Union address, he claimed protective tariffs, especially for military supplies, was crucial for US independence.

Between that time and 1860, tariffs and excise taxes comprised 80-95%. of federal income.  The amounts of each varied.  Thomas Jefferson abolished the whiskey tax, but it was re-instituted in 1812.  When national debt was paid off in 1834, Andrew Jackson abolished most excise taxes and halved tariffs.  By this time tariffs had become a major political issue, especially following the tariff of 1828, the so called “Tariff of Abominations,” which imposed a 38% tax on 92% of imported goods.  Most tariffs were instituted to protect domestic industry, favored by Whigs (which later became Republicans), who were mostly Northeastern industrialists and industrial wage earners.  Southern Democrats strongly opposed tariffs.  In the South, tariffs raised prices for every household and also made it harder for the British textile manufacturers to buy their cotton. Some historians believe the cause of secession was not slavery but tariffs.

The Republican platform of 1860 favored higher tariffs. Abraham Lincoln made tariff increases one of his priorities. The Morrill Tariff passed in 1861, after seven Southern states had seceded and their Congressmen had resigned.  The Morrill Act raised tariffs from 17% overall and 28% on dutiable items to 26% overall and 36% on dutiable items, but it wasn’t enough to feed the government and the approaching war, so a second tariff bill later that summer raised tariffs another 10%.  Lincoln also instituted the first income tax in the US, under the “Revenue Act of 1861,” but it was repealed ten years later.

After the Civil War, tariffs fluctuated mildly but remained, with excise taxes, the main source of federal funding until 1913.  This was the year the income tax went into effect.

Since 1913, most of federal income comes from individual income taxes, payroll taxes (later), and corporate income taxes, with 41% coming from individual income taxes.  Excise taxes apply to “luxury” items, like tobacco, alcohol, and gambling, but also to telephone and utilities, among other things.  Excise taxes comprise about 3.8 percent of federal income.  Tariffs now constitute only about 1.7% of government revenues, $30 billion in 2012.

Far from being a supporter of free trade, the US has 12,000 specific tariffs on imports.  Tariffs on imported tobacco products are the highest and can run up to 350%.  Peanut tariffs that date back to 1933 run from 131.8% for shelled peanuts to 163.8% for unshelled peanuts.  New Balance shoes enjoys a 48% tariff on foreign sneakers like Nike and Adidas.  There’s a 40% tariff on Japanese leather.  We pay a 100% tariff on European meats, truffles, and Roquefort cheese, just to name a few.

It is arguable whether tariffs protect domestic industry, or benefit a country’s economy, especially if they start trade wars with other governments.  In the case of the solar industry, the added cost to imported solar panels may be prohibitive for large-scale projects that could employ large numbers of people.  It looks like a protective tariff, not for domestic solar panel manufacturers, but for the oil industry.  But the good news is that the solar industry is thriving, considering the 500 percent increase in imports over the past five years.  No wonder the oil companies are threatened.